L B P T

California State Board of Equalization,
Legislative Division
LEGISLATIVE BULLETIN
PROPERTY TAX LEGISLATION
2000
PROPERTY TAX LEGISLATION
STATE BOARD
OF
EQUALIZATION
LEGISLATIVE DIVISION
TABLE OF CONTENTS
C HAPTERED L EGISLATION A NALYSES
Assembly Bill 659 (Wiggins) Chapter 601
Welfare Exemption – Low Income Housing
Historic Wooden Vessels
Indian Tribal Owned Low Income Housing Projects
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Assembly Bill 1790 (Wiggins) Chapter 272
Grapevines - Pierce’s Disease and Phylloxera
10
Assembly Bill 1966 (Wiggins) Chapter 406
Possessory Interests – Supplemental Assessments
14
Assembly Bill 2092 (Reyes) Chapter 575
Disabled Veterans’ Exemption - Retroactive Exemptions
18
Assembly Bill 2562 (Brewer) Chapter 922
Disabled Veterans’ Exemption
Late Filing
Portability
23
Assembly Bill 2612 (Brewer) Chapter 607
Intercounty Pipeline Rights-of-Way
31
Assembly Bill 2891 (Committee on Revenue & Taxation) Chapter 646
Statute of Limitations – Escape Assessments
State Assessee Appeals - Filing Dates
Supplemental Assessments - Exemptions
33
Assembly Bill 2898 (Committee on Revenue & Taxation) Chapter 1052
Private Railroad Car and Timber Yield Taxpayers Bill of Rights
34
Senate Bill 383 (Haynes) Chapter 693
Erroneously Granted Proposition 110 Base Year Value Transfers
40
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LEGISLATIVE DIVISION
PROPERTY TAX LEGISLATION
TABLE OF CONTENTS
CONTINUED
C HAPTERED L EGISLATION A NALYSES
Senate Bill 1362 (Poochigian) Chapter 1085
Disabled Veterans’ Exemption
Low Income Threshold
Exemption Amounts Simplified
Late Filing
Portability
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Senate Bill 1417 (Wright) Chapter 417
Proposition 60/90/110 Base Year Value Transfers
Rescissions
Intercounty Ordinances
53
Senate Bill 1844 (Kelley) Chapter 613
Mandatory Audit Threshold
57
Senate Bill 1933 (Vasconcellos) Chapter 619
California Commission on Tax Policy in the New Economy
60
Senate Bill 2084 (Polanco) Chapter 861
Commercial Trailers and Semitrailers
63
Senate Bill 2170 (Committee on Revenue & Taxation) Chapter 647
Property Tax Omnibus Bill
Statute of Limitations – Escape Assessments
Supplemental Assessments – Exemptions
State Assessee Appeals - Filing Dates
Private Contractors
Removed Property.
Documented Vessels
State Lands Commission
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Senate Bill 2195 (Soto) Chapter 1086
Disabled Veterans’ Exemption
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Assembly Bill 659 (Wiggins) Chapter 601
Welfare Exemption – Low-Income Housing
Historic Wooden Vessels
Indian Tribal Owned Low-Income Housing Projects
Tax levy; effective September 24, 2000. Amends Sections 214 and 237 of, and adds
Section 230 to, the Revenue and Taxation Code.
This bill (1) reinstates eligibility for the welfare exemption to property qualifying
on the sole basis that the property provides housing to low-income residents and
is wholly owned by non-profits, as specified; (2) exempts a wooden vessel of
historical significance meeting specific requirements; and, (3) modifies the
exemption for low-income housing owned and operated by the housing entity of
a federally designated Indian tribe to permit a partial exemption corresponding to
that portion of the property occupied by lower income households.
Sponsor: Assembly Member Patricia Wiggins
Welfare Exemption - Low-Income Housing
Revenue and Taxation Code Section 214
Claimant Eligibility
This measure adds subparagraph (C) of paragraph (1) of subdivision (g) to
reinstate eligibility for the welfare exemption on the sole basis of providing lowincome housing for property that is wholly owned by an eligible non-profit
corporation if 90 percent or more of the occupants of the property are lower
income households whose rent does not exceed the rent prescribed by Section
50053 of the Health and Safety Code. This reinstatement applies to organizations
claiming the exemption for the January 1, 2000 lien date. Property owned by a
limited partnership in which the managing general partner is an eligible
nonprofit corporation is specifically excluded from this reinstatement and to
qualify for exemption, such property must either (1) be financed with tax-exempt
bonds, or government provided loans or grants or (2) the owner must be eligible
for and receive low-income housing income tax credits.
Additionally, this measure places an exemption cap of $20,000 of tax for nonprofit organizations who qualify under 214(g)(1)(C). The total exemption amount
allowed under Section 214(g) to a taxpayer, with respect to a single property or
multiple properties for any fiscal on the sole basis of the application of this
subparagraph, may not exceed twenty thousand dollars ($20,000) of tax.
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Restricted Use Documentation
This bill reinstates the use of an “other legal document” as documentation that
the project is restricted to use as low-income housing but only for property that is
wholly owned by an eligible non-profit corporation. This bill adds Section
214(g)(1)(C)(ii) to specifically exclude property owned by a limited partnership in
which the managing general partner is an eligible nonprofit corporation from this
reinstatement. Property owned by limited partnerships must either have (1) a
recorded deed restriction or (2) an enforceable and verifiable agreement with a
public agency limiting its use to low-income housing.
Law Prior To Amendment:
Subdivision (g) of Section 214 extends the welfare exemption to property owned and
operated by qualifying organizations and used exclusively for rental housing
occupied by lower-income households. Qualifying organizations include limited
partnerships in which the managing general partner is a qualified nonprofit
corporation meeting the requirements of Section 214, as well as religious, hospital,
scientific, or charitable funds, foundations or corporations. A partial exemption is
available equal to the value of the portion of the property serving lower-income
households
For a low-income housing project owned and operated by a qualifying organization
to be eligible for the exemption, the project must meet one of the following criteria:
1. The acquisition, rehabilitation, development, or operation of the property, or any
combination of these factors, is financed with tax-exempt mortgage revenue
bonds or general obligation bonds, or is financed by local, state, or federal loans
or grants and the rents of the occupants who are lower-income households do
not exceed those prescribed by deed restrictions or regulatory agreements
pursuant to the terms of the financing or financial assistance; or
2. The owner of the property is eligible for and receives low-income housing tax
credits pursuant to section 42 of the Internal Revenue Code of 1986, as added by
Public Law 99-514.
Claimant Eligibility
Legislation effective January 1, 2000, through Assembly Bill 1559 (Stats. 1999, Ch.
927), deleted a provision of law which permitted housing to qualify for the welfare
exemption also on the basis that twenty percent or more of the occupants of the
property are lower-income households. Consequently, for organizations claiming
the exemption for the January 1, 2000 lien date, to qualify for the welfare exemption,
low-income housing must either (1) be financed with tax-exempt bonds, or
government loans or grants or (2) the owner must be eligible for and receive lowincome housing income tax credits.
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Restricted Use Documentation
In order to be eligible for the exemption provided by subdivision (g) of Section 214,
the owner of the property must do both of the following:
1. Certify and ensure that there is documentation, as specified, that restricts the
project’s usage and that provides that the units designated for use by lowerincome households are continuously available to or occupied by lower-income
households at rents that do not exceed those prescribed by Section 50053 of the
Health and Safety Code, or, to the extent that the terms of federal, state, or local
financing or financial assistance conflicts with section 50053, rents that do not
exceed those prescribed by the terms of the financing or financial assistance.
2. Certify that the funds that would have been necessary to pay property taxes are
used to maintain the affordability of, or reduce rents otherwise necessary for, the
units occupied by lower-income households.
With respect to the necessary documentation, prior to January 1, 2000, nonprofit
organizations that own low-income housing projects qualifying for the welfare
exemption were required, in part, to certify and ensure that there is a deed
restriction, agreement, or “other legal document” that restricts the project’s usage.
For organizations claiming the exemption for the January 1, 2000 lien date, these
provisions were made more restrictive by Assembly Bill 1559. Specifically, any deed
restriction must be recorded, any agreement must be both enforceable and verifiable
as well as be entered into with a public agency, and the use of an “other legal
document” is no longer permitted to substantiate the restrictions. Some nonprofit
organizations’ pre-existing documents for these purposes did not meet the higher
standards when the law change took place. Thus, unless these low income housing
projects can obtain the necessary documentation, they will be ineligible for
exemption for the 2000-01 fiscal year (July 1, 2000 – June 30, 2001).
Background:
The provisions of 1999’s Assembly Bill 1559 (Wiggins) were designed to revoke the
property tax exemption from properties owned by certain owners of substandard
housing and were sponsored by the Los Angeles Housing Project. In the course of
investigating various slum-housing projects, the organization was surprised to
discover that these properties were receiving a property tax exemption under a
provision which permits the property to qualify solely on the basis that the residents
are low-income households. The organization also found a loophole permitting
these particular properties to receive the exemption without being subject to a
recorded deed restriction.
Comments:
1. Purpose. To ensure that projects providing safe and decent housing for low
income persons are not unintentionally disqualified from receiving the
exemption as a result of the adjustments made by AB 1559 to revoke the
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exemption from organizations operating substandard housing.
This bill
reinstates the exemption for certain properties wholly owned by non-profits that
do not receive income tax credits or government financing but who whose
housing projects are at least 90% occupied by low income persons subject to a
$20,000 exemption cap.
2. The exemption cap does not apply to non-profit organizations that receive tax
credits or government financing. Organizations which receive tax credits or
have governmental financing would be eligible for a 100% exemption under the
provisions of Section 214(g)(1) or 214(g)(2) which does not impose an exemption
cap.
3. For nonprofit organizations that own property in more than one county, as
well as organizations that own more than one property in a county, it may be
difficult to track the $20,000 exemption cap. The cap applies to all property
used for rental to low income households owned by a taxpayer. Currently,
claims for the welfare exemption reviewed by the Board of Equalization do not
provide information on the assessed value of the property. It is not indicated
who would be responsible for tracking this information. Moreover, many
counties do not have available a current assessed value for these properties since
the properties are exempt from property taxation. The assessors’ staffs may be
required to appraise the properties in order to determine the amount of property
taxes owed on properties owned by the nonprofit organizations once the cap is
exceeded.
4. The phrase “$20,000 of tax” may be problematic to administer. It may be more
cumbersome to determine the proper amount of assessed value to exempt since
tax rates vary. Therefore it may be preferable to cap the exemption at $2,000,000
of assessed value. Please note that the California Supreme Court has held that
the welfare exemption does not provide an exemption from special assessments
for local improvements, but only from property taxes. The property of nonprofit
organizations remain subject to levies of special districts. (Cedars of Lebanon v.
County of Los Angeles (1952) 35 Cal.2d 729, 747)
5. The statute does not state how it will be determined which properties of a
nonprofit owning multiple properties will get the exemption.
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Historic Wooden Vessels
Revenue and Taxation Code Section 230
This bill exempts from property taxation a refurbished original, wooden inland
waters vessel of 47 feet or larger, built in California during or prior to 1910, that
has continuously thereafter remained in California waters, and has been
designated a California State Historical Landmark and that is part of a maritime
museum. This bill also exempts any personal property on the vessel that is used
in its operation.
Specifically, this bill exempts a particular historical vessel, the Madaket, which is
owned by the Humboldt Bay Maritime Museum and located in Eureka,
California.
Law Prior To Amendment:
Article XIII, Section 2 of the California Constitution provides that the Legislature
may, two-thirds of the membership of each house concurring, classify any personal
property for differential taxation or for exemption. Personal property may be
exempt by reason of its ownership, use, and/or type.
Background:
The Humboldt Bay Maritime Museum, Inc. is a non-profit organization dedicated to
preserving, protecting, promoting and sharing Northern California maritime
history, primarily in the Humboldt Bay region. In addition to operating a museum,
it also owns a vessel, the Madaket, a former ferry built in 1910. The Madaket was
first used to ferry workmen to Woodley and Samoa Islands where lumber and pulp
mills were located. Once bridges were constructed to these Islands, the Madaket
was turned over to the City of Eureka as a tourist attraction and eventually acquired
by the Museum. The Madaket is the oldest commercial passenger craft in the United
States. It is currently used to take visitors on 75 minute narrated historical tours of
the Humboldt Bay harbor. The cruises operate daily from May to October.
The Humboldt Bay Maritime Museum applied for a property tax exemption via the
welfare exemption on the Madaket. However, the historical vessel was ineligible for
the welfare exemption because of 1) the lack of an "irrevocable dedication" clause in
their organization’s articles of incorporation and 2) the use of the vessel as a
“commercial venture” (e.g. fees for taking visitors on bay excursions). The income
from these operations represent approximately 20% of the vessel's income and is
used for the maintenance of the vessel and other expenses. While the Museum
indicated that they could remedy the first issue (irrevocable dedication clause), they
could not cease the "commercial" use of the vessel and keep the museum (vessel)
solvent.
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Comments:
1. Purpose. To obtain a property tax exemption for the Madaket as personal
property, since it can not technically qualify for exemption under the welfare
exemption.
2. Unlike real property, which requires constitutional amendment for exemption,
any personal property may be statutorily exempted by a 2/3 vote of the
Legislature.
Existing law provides a variety of exemptions or preferential
assessments for various types of vessels. (Sections 209, 209.5, 228, 227, 1) In
addition, Section 220 exempts aircraft of historical significance, as specified, from
taxation and Section 217.1 exempts aircraft in an aerospace museum, as specified.
3. Annual Claim Form Required. To qualify for the exemption the Museum
would be required to file a claim each year by February 15.
Indian Tribal Owned Low-Income Housing Projects
Revenue and Taxation Code Section 237
This bill requires that at least 30%, rather than 100%, of the units in Indian Tribe
low-income housing projects be continuously available for lower income
households to be eligible for exemption under Section 237.
Law Prior To Amendment:
Last year, SB 2231 (SR&T) added Section 237 to the Revenue and Taxation Code to
provide a 100% exemption for Indian Tribe low-income housing projects that was
analogous to the welfare exemption available for low-income housing. However,
unlike the welfare exemption which permits a partial exemption depending on the
percentage of low income tenants, the tribal projects must be 100% occupied by
lower income households.
In General:
Any property, real or personal, which is held in trust by the United States for an
Indian Tribe or its members is immune from property taxation.
Generally,
California imposes property taxes on Indian-related property in three instances: (1)
Indian tribal owned lands that are located outside the Indian reservation, (2) land
owned by Indian tribal members that is located within the Indian reservation if it is
owned in fee and (3) Indian lands that are used by non-Indians (possessory
interests).
The welfare exemption applies to property owned and operated by qualifying
organizations and used exclusively for rental housing for lower-income households.
Qualifying organizations include limited partnerships in which the managing
general partner is a qualified nonprofit corporation meeting the requirements of
Section 214, as well as religious, hospital, scientific, or charitable funds, foundations
or corporations. To qualify for the exemption, various organizational requirements
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must be met in addition to demonstrating the charitable uses of the property in
question.
Prior to the enactment of Section 237, certain Indian Housing Authorities have been
denied the welfare exemption on property located off-reservation and not otherwise
immune from taxation. There were two organizational requirements which Indian
Tribes and tribally established housing authorities could not satisfy to be eligible for
the welfare exemption. Revenue and Taxation Code Section 214.01 requires that the
applicant’s Articles of Incorporation, its Bylaws, Articles of Association,
Constitution, or Regulations contain a statement that the organization’s property is
irrevocable dedicated to religious, charitable, scientific, or hospital purposes. In
addition, Section 214.8 requires that the welfare exemption not be granted to any
organization unless that organization is qualified as an exempt organization under
23701(d) or Internal Revenue Code Section 501(c)(3). These conditions could not be
met because tribally designated housing entities must be created under tribal law to
receive block grants for low income housing under the United States Department of
Housing and Urban Development.
Background:
Federal funds for financing low-income housing projects are available under a 1996
Congressional Act, the Native American Housing Assistance and Self-Determination
Act. One condition of receiving these funds is that the tribe have a cooperation
agreement with local governments exempting the housing project from taxation.
Consequently without a property tax exemption, the tribes could not receive funds
under this particular program.
Comments:
1. Purpose. To ensure that low-income housing projects owned by federally
recognized Indian tribes will not be disqualified from receiving the exemption if
some units are rented to households whose income exceeds the low income
threshold level.
2.
These provisions permit the newly created exemption for tribal owned
housing to receive a partial exemption in conformance with the partial
exemption provided to low-income housing properties that qualify under the
welfare exemption. With respect to the welfare exemption, Revenue and
Taxation Code Section 214(g)(1) provides that a low-income housing project
“shall be entitled to a partial exemption equal to that percentage of the value of
the property that the portion of the property serving lower income households
represents of the total property in any year”.
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Assembly Bill 1790 (Wiggins) Chapter 272
Grapevines - Pierce’s Disease and Phylloxera
Effective January 1, 2001. Amends Section 53 of the Revenue and Taxation Code.
This measure, with respect to the base year value transfer provisions for replanted
grapevines due to Pierce’s Disease or phylloxera, (1) deletes the requirement that
the replacement grapevines be of the same type and (2) modifies the requirement
that the replacement grapevines be planted at a similar density to allow a
proportionate base year value transfer if the vines are planted at a greater density.
Sponsor: Assembly Member Patricia Wiggins
Law Prior To Amendment:
Section 53 of the Revenue and Taxation Code makes available property tax relief for
grapevines planted to replace grapevines removed because of phylloxera and/or
Pierce’s Disease. The tax relief is limited to vineyards located in counties that have
adopted an ordinance making the provisions of Section 53 applicable. The
ordinance can provide relief for one or both conditions. The relief is provided by
means of a “base year transfer.” The factored base year value of the removed
grapevines under Proposition 13 limitations is generally less than the current market
of the newly planted grapevines. These provisions permit the replacement
grapevines to assume the previous assessed value of the removed grapevines.
Existing law places conditions on both the removed grapevines and the replacement
grapevines, as follows:
The removed grapevines must be:
•
removed solely as a result of phylloxera infestation and/or Pierce’s Disease, as
certified by the county agricultural commissioner, and
•
less than 15 years of age.
The replacement grapevines must be:
•
“substantially equivalent” to the removed grapevines, defined as grapevines of a
similar type that are planted at a similar density, and
•
planted on the same parcel.
Existing law provides that all newly planted grapevines are exempt for the first
three years after the season in which they are first planted. Thus, in practice, the
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base year value transfer would not take place until three years later (i.e. after the
exemption period for new plantings).
In General:
Agricultural property is subject to the assessment rules of Proposition 13, in that it
retains its base year value until new construction or a change in ownership takes
place. Increases in assessment are limited to no more than two percent a year. At
the time of a reassessable event, a new base year value is established for the entire
property if there is a change in ownership, or for the new property in the case of
new construction.
Generally, when a portion of a vineyard is pulled, the base year value of those
grapevines is removed from the assessed value of that property as of the following
lien date. When the grapevines are replanted, they receive a “new” three year
exemption period. In the fourth year after replanting they will become taxable at the
current market value as of the lien date.
Agricultural property may be preserved as such under the Williamson Act
(California Land Conservation Act of 1965), whereby a landowner enters into a
contract with the local government to maintain the agricultural use in exchange for
valuation and taxation of the land as agricultural property. Property subject to a
Williamson Act contract is generally valued based on its income stream, and is
revalued annually. Each year, the property will be assessed at the lowest of the
factored base year value, the Williamson Act value, or the current fair market value.
Similar Base Year Value Transfer Provisions. California property tax law provides
for various situations where a Proposition 13 base year value is either retained or
transferred to another property. Briefly, Section 70(c) of the Revenue and Taxation
Code provides that where real property has been damaged or destroyed by a
misfortune or calamity, the reconstructed property will maintain the assessed value
of the pre-damaged property. Sections 69 and 69.3 provide that where property is
destroyed in a Governor-declared disaster, a replacement property may be acquired
and the replacement property will retain the Proposition 13 base year value of the
damaged or destroyed property. Section 63.1 permits property to transfer between
parents and children while maintaining the property’s Proposition 13 base year
value. Section 69.4 provides base year value transfers for property that suffers
environmental contamination that makes the property uninhabitable. Finally,
Section 69.5 permits persons over the age of 55 years or disabled persons to transfer
their Proposition 13 base year value to another property. The base year value
transfers listed here have been specifically provided for by constitutional
amendments approved by the voters. The base year value transfer provisions
provided by Section 53 have not been similarly made by constitutional
authorization. The statutory provisions of Section 53 may raise issues that it has the
effect of exempting real property from taxation without the benefit of constitutional
authorization.
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Background:
Chapter 413 of the Statutes of 1992 (AB 3303, Hansen) added subdivision (b) to
Section 53 to provide for the special assessment procedures for grapevines infested
by phylloxera. Chapter 607 of the Statutes of 1997 (AB 122, V. Brown) extended the
provisions for Pierce’s Disease.
Comments:
1. Purpose. To eliminate the requirement that replacement grapevines be of the
same type. The number of grapevines affected with Pierce’s Disease is on the
rise. Since there is no remedy for infected vines, they must be pulled.
Replanting the same type of grapevine, may be impractical because that type
would also be susceptible to Pierce’s Disease.
This bill would ensure that
growers who replant a different type of vine are not ineligible for this property
tax relief. The base year value transfer would be available for any replanting of
grapevines to grapevines.
2. Replantings at a Greater Density would no longer Completely Forfeit A Base
Year Value Transfer. As introduced this bill deleted language related to
substantial equivalency which included requirements of (1) same type (2) same
parcel and (3) similar planting density. The July 5 amendment, restored and
modified language relating to planting density. This amendment provides that,
if grapevines are replanted at a greater density, a base year value transfer may be
made, but limits the base year value transfer to an equivalent number of
replacement grapevines. That portion in excess of a substantially equivalent
amount would be assessed at current market value. The March 20 amendment
restored language that specifically states that replacement vines must be planted
on the same parcel to address the concerns of some county assessors over the
deletion of this requirement.
3. Benefits of a Base Year Value Transfer. A base year value transfer permits the
property owner to maintain the assessed value of the old vineyard after the new
vineyard is replanted. Without the base year value transfer, the replanting would
trigger a reassessment of the vineyard to reflect current fair market value. (Only
the grapevines and improvements would be reassessed as “new construction”,
the underlying land retains its base year value.)
4. Replanting Provides an Opportunity to Modify the Vineyard to Increase the
Value and Productivity of the Property. A replanted vineyard may be more
economically productive, and thereby more valuable, either by planting a
different variety that commands a higher price per ton, or a variety that produces
greater tons per acre, or both. In addition, changing the spacing or training
system could improve the production efficiency and grape quality.
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5. Vineyards May be Pulled for a Variety of Economic Based Reasons. To ensure
that tax relief was limited to property owners whose vineyards became infected,
the original legislation, which was limited to phylloxera, was amended to specify
that the grapevines must have been removed solely as a result of phylloxera.
(Vineyards infected with phylloxera may still be economically productive for a
period of time.) Further, the county agricultural commissioner was charged with
the responsibility of certifying in writing that the grapevines were pulled solely
because of the infestation or disease for purposes of receiving this tax benefit.
Thus, a system of governmental oversight is in place to ensure that the benefits
are not extended to grapevines that are pulled for other economic reasons.
6. Optional County Participation. The special assessment provisions authorized by
this measure would be extended only to property located in a county where the
board of supervisors adopts an ordinance making these provisions applicable.
The Board is aware of four counties that have chosen to participate in this
program for phylloxera: Napa, San Joaquin, Lake, and Riverside. For Pierce’s
Disease, we are aware of only one county with an ordinance, Riverside.
7. Generally Base Year Value Transfers Do Not Provide Relief to Properties in
the Williamson Act. Property subject to a Williamson Act contract is assessed at
the lowest of three values: the factored base year value, the Williamson Act
value, or the current fair market value. This measure would not affect the
assessed value of those vineyards affected by Pierce’s Disease or phylloxera
where the Williamson Act value is still the lowest of the three determined values.
However, in those vineyards, the assessed value would, generally, be reduced
the following year. This is because the Williamson Act value is determined
according to a capitalization of income method. Since a nonproducing or pulled
grapevine would produce little or no income, this loss in productive capacity
would result in a reduced assessment of the property in the subsequent lien date
(assuming that all other valuation factors remain constant from the previous
year).
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Assembly Bill 1966 (Wiggins) Chapter 406
Possessory Interests – Supplemental Assessments
Tax levy; effective September 12, 2000. Amends Section 75.5 of the Revenue and
Taxation Code.
This bill excludes from supplemental assessment newly created taxable
possessory interests, established by month-to-month agreements in publicly
owned real property, having a full cash value of fifty thousand dollars ($50,000) or
less.
Sponsor: Assembly Member Patricia Wiggins
Law Prior To Amendment:
Under existing law the person who owns or controls property on the lien date,
January 1, is responsible for paying taxes on the property for the ensuing fiscal year
(July 1 to June 30)1 via the regular tax bill. Consequently, under existing law,
situations occur in which taxpayers are responsible for payment of taxes for a fiscal
year even though they do not own or control property for any period of that fiscal
year (or, with respect to possessory interests, where they have vacated the property
after January 1).
Also, under current law, a taxpayer who acquires a possessory interest created after
the lien date is immediately assessed for the remainder of the tax year via a
supplemental assessment. However, a taxpayer who terminates possession after the
lien date is not given the benefit of a “negative” supplemental assessment to refund
taxes for the remainder of the tax year. Unlike other types of real property and
personal property, when a possessory interest is involved, it is possible that
government can receive two streams of property tax revenue from two separate
leases of the same physical piece of real property.2 This is illustrated in the example
below. Pilot A has rented an aircraft hanger, Hanger B-2, at a public airport for the
last five years. On January 2, 2000, Pilot A terminates the month-to-month rental
agreement on Hanger B-2 to move to a more desirable aircraft hanger, Hanger A-1,
at the same airport. Hanger B-2 is immediately rented out to Pilot B. As noted in
the table below, under existing law property taxes are collected from both Pilot A
1 Tax bills on the secured roll are generally mailed to property owners at the end of October and tax
bills for the unsecured roll are generally mailed at the end of July.
2 Personal property is not subject to supplemental assessment.
Real property is subject to
supplemental assessment, but taxes for the regular assessment roll are generally prorated between
the buyer and seller in escrow, thus with the combination of the issuance of supplemental
assessments and proration of the regular tax bill, each party pays only their proper share of taxes.
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and Pilot B on Hanger B-2 for a nearly 18 month period from January 2, 2000 to June
30, 2001, thus giving rise to a perception of “double taxation.” In addition, from the
perspective of Pilot A, he is paying property taxes on two hangers from January 2,
2000 to June 30, 2001, although he only has use of one.
Hanger
Pilot A
Pilot B
B-2
Fiscal Year 1999-2000
(7/1/99 - 6/30/00)
and
Fiscal Year 2000-2001
(7/1/00 - 6/30/01)
via the regular tax bills
Fiscal Year 1999-2000
(1/2/00 - 6/30/00)
and
Fiscal Year 2000-2001
(7/1/00 - 6/30/01)
via two supplemental
assessments
A-1
Fiscal Year 1999-2000
(1/2/00 - 6/30/00)
and
Fiscal Year 2000-2001
(7/1/00 - 6/30/01)
via two supplemental
assessments
N/A
In this example, this bill eliminates the tax bills noted in strike out.
Hanger
Pilot A
Pilot B
B-2
Fiscal Year 1999-2000
(7/1/99 - 6/30/00)
and
Fiscal Year 2000-2001
(7/1/00 - 6/30/01)
via the regular tax bills
Fiscal Year 1999-2000
(1/2/00 - 6/30/00)
and
Fiscal Year 2000-2001
(7/1/00 - 6/30/01)
via two supplemental
assessments
Fiscal Year 2001-2002
(7/1/01 – 6/30/02)
via the regular tax bill.
A-1
Fiscal Year 1999-2000
(1/2/00 - 6/30/00)
and
Fiscal Year 2000-2001
(7/1/00 - 6/30/01)
via two supplemental
assessments
Fiscal Year 2001-2002
(7/1/01 – 6/30/02)
via the regular tax bill.
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In General:
The Lien Date. The Revenue and Taxation Code provides that the county assessor
must locate, describe, classify, estimate the value of, and identify the assessee of
every locally-assessed taxable property in the county as of the lien date (January 1).
This information must be listed on the assessment roll and delivered to the county
auditor on or before July 1. Since it is impossible to do all of this work
instantaneously, the Revenue and Taxation Code provides that the assessment will
be made as of the lien date preceding the fiscal year for which the taxes are levied.
Thus, the owner of property on January 1 is responsible for the property taxes on
that property for the ensuing fiscal year July 1 - June 30. The owner of record on the
lien date is responsible for the taxes even if the property owner sells or otherwise
disposes of that property at anytime after the lien date. There is no provision in the
code to prorate taxes if ownership of the property is terminated after the lien date.
With real property, proration of an outstanding tax liability is usually handled in
escrow. A transfer of real property, however, generally is a matter of agreement
between private parties and involves only one transferred fee interest rather than the
respective termination and creation of separate taxable possessory interests on a
single property during the course of a year.
Possessory Interests. In certain instances, a property tax assessment may be levied
when a person or entity possesses publicly-owned real property that, with respect to
its public owner, is either immune or exempt from property taxation. These uses are
commonly referred to as “taxable possessory interests” and are typically found
when an individual or entity leases or otherwise takes possession of governmentowned real property.
Background:
Under existing law, the person who owns or controls property on the lien date,
January 1, is responsible for paying taxes on the property for the ensuing fiscal year
(July 1 to June 30)3. Consequently, under existing law, situations occur in which
taxpayers are responsible for payment of taxes for a fiscal year even though they do
not own or control property for any period of the fiscal year (or with respect to
possessory interests where they have vacated after January 1). This is not generally
an issue with real estate sold between private parties since the escrow company
involved in the transaction routinely prorates both current and pending property
taxes between the buyer and the seller. But it can be an issue with personal property
(i.e. boats, planes, and business personal property used in a trade, profession or
business) and taxable possessory interests.
With respect to personal property sold between private parties, an agreement can be
reached between the parties to either adjust the selling price to reflect property
Tax bills on the secured roll are generally mailed to property owners at the end of October and tax
bills for the unsecured roll are generally mailed at the end of July.
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taxes, have the buyer assume responsibility for the upcoming tax bill, or prorate
current outstanding property taxes. The issue of property taxes can often be
overlooked, however, when private parties sell items of personal property subject to
property tax. Sellers who fail to consider property taxes often have been
unpleasantly surprised to receive a tax bill, for which they are legally responsible
many months after the property has been sold.
With respect to taxable possessory interests, however, it generally is not possible to
prorate property taxes when one terminates and another commences because (1) the
agreement is not between the two property users but between a governmental entity
and the users and (2) each taxable possessory interest is considered to be a separate
interest in real property. In addition, although there are provisions of law which
allow the county to assess a new possessory interest created after the lien date via a
supplemental assessment, there is no provision that would permit the county to
cancel the taxes on possessory interests terminated after the lien date, either via a
“negative” supplemental assessment or a cancellation of the prior tax bill.
Comments:
1. Purpose. To address the perceived inequity that occurs when a possessory
interest is terminated after the lien date.
2. Tax liability for a new holder of a possessory interest would not commence
until the following lien date (January 1) for the ensuing fiscal year (July 1
to June 30). Delaying tax liability at the commencement of possession is
meant to offset the taxes that will be owed in the final year of possession.
3. Eliminating supplemental assessments upon these possessory interests
ensures that government receives only one stream of tax revenue from each
property subject to more than one exclusive possessory interest during a
given year.
This addresses the perceived “double taxation” of these
interests.
4. Key Amendments. The June 13 amendment recast the proposed solution to
the problem of double taxation to eliminate certain possessory interests from
supplemental assessment. Specifically, that amendment would exempt from
supplemental assessment the creation of month-to-month possessory interests
with a value of $50,000 or less. This alternative approach was taken to
remove the opposition of Los Angeles County over the prior version of the
bill, which would have required the cancellation of the tax bill. The June 29
amendment corrects a drafting error that would have inadvertently excluded
mobilehomes from supplemental assessment.
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Assembly Bill 2092 (Reyes) Chapter 575
Disabled Veterans’ Exemption - Retroactive Exemptions
Effective January 1, 2001. Adds Section 890.3 to the Military and Veterans Code.
This bill adds Section 890.3 to the Military and Veterans Code, which with respect
to property taxes, permits the disabled veterans’ exemption to be granted
retroactively for property for which the exemption would have been available but
for the taxpayer’s failure to receive a timely disability rating from the United
States Department of Veterans Affairs (USDVA). The exemption, subject to the
limitations on refunds, would be granted as of the effective date of the disability
rating.
Sponsor: Assembly Member Sarah Reyes
Law Prior to Amendment:
The disabled veterans’ exemption is generally available in two amounts4:
•
$100,000 for qualified persons, hereafter referred to as the “basic exemption”
which is provided on a one time filing basis, and
•
$150,000 for qualified persons with low incomes, as specified, hereafter referred
to as the “low income exemption” which requires a first time filing and
subsequent annual filings to reaffirm income eligibility.
With respect to property tax exemptions that require claims, Article XIII, Sec. 6 of the
California Constitution provides that the failure in any year to claim, in a manner
required by the laws in effect at the time the claim is required to be made, an
exemption which reduces a property tax shall be deemed a waiver of the exemption
for that year.
For both levels of disabled veterans’ exemption, first time filings for the basic
exemption and first time filings or annual re-filings for the low income exemption, a
claim must be filed between the lien date (January 1) and February 15 to receive the
full amount of the exemption on the upcoming tax bill for the ensuing fiscal year
(July 1 – June 30). If a claim is filed between February 16 and December 10, 80
percent of the exemption is available. If a claim is not made on or before December
10, which is the date the first installment of the property tax bill becomes delinquent,
then the exemption may not be applied to taxes owing for that fiscal year. For
In practice, despite the apparent distinction made in existing law that the amount of the exemption
varies according to the type of disability, virtually all claimants meet the “totally disabled”
classification. To simplify this discussion, the remainder of the analysis will refer to either the
$100,000 basic exemption or the $150,000 low income exemption.
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annual re-filings of the $150,000 low income exemption, where a claim is not made
on or before December 10, the exemption would not be lost completely, but would
instead be reduced to the basic exemption level of $100,000.
The following table summarizes the filing provisions for the disabled veterans’
exemption under prior law.
Exemption
Amount of
Exemption
Basic
$100,000
Low Income
$150,000
Filing
Reqs.
One
Time
Only
Annual
Refiling
Claim
Filed By
2/15
$1,000
$1,500
Current Tax
Year
Claim Filed
Between
2/16 and 12/10
$800
(1000 x 80%)
$1,200
(1,500 x 80%)
Claim Filed
After
12/10
$0
$0
Prior Tax
Year
Refunds
Available
No
No
The following table summarizes the filing provisions for the disabled veterans’
exemption under the new law.
Exemption
Amount of
Exemption
Filing
Reqs.
Basic
$100,000
One
Time
Only
Low Income
$150,000
Annual
Refiling
Claim
Filed By
2/15
$1,000
Current Tax
Year
Claim Filed
Between
2/16 and 12/10
$1,000
Claim Filed
After
12/10
$1,000
$1,500
$1,500
$1,500
Prior Tax
Year
Refunds
Available
Yes, up to
four prior tax
years @
$1,000 per
year
Yes, up to
four prior tax
years @
$1,500 per
year.
In General:
Section 4(a) of Article XIII of the California Constitution grants the Legislature the
authority to exempt from property tax, in whole or in part, the home of a person (or
a person’s spouse) who is injured in military service. This exemption is commonly
referred to as the “disabled veterans’ exemption.” Injuries that qualify a veteran for
the exemption include: 1) total disability, 2) blindness and 3) lost use of two or more
limbs. The spouse of a disabled veteran is able to maintain the exemption after the
veteran’s death as long as the spouse is unmarried. Additionally, since 1994, the
unmarried spouse of a person who, as a result of a service-connected injury or
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disease, dies while on active duty is able to qualify for the disabled veterans’
exemption.
Section 205.5 of the Revenue and Taxation Code implements the Legislature’s
authority to provide a property tax exemption for disabled veterans and/or their
unmarried surviving spouses. As noted in the table below, the amount of the
exemption depends upon 1) type of injury and 2) household income.
Current law establishes, until January 1, 2001, the following exemption amounts:
Disability Type
•
•
•
•
Blind
Lost Two or More Limbs
Totally Disabled
Active Duty Death
Basic Exemption
Low Income Exemption5
$40,000
$60,000
$100,000
$150,000
The following table summarizes the late filing provisions for various property tax
exemptions where a claim must be filed to receive the exemption.
Summary of Late Filing Provisions For Various Exemptions
Exemption
Disabled Veterans’
Basic
Disabled Veterans’
Low Income
Homeowners’
Veterans’
Welfare
Church
Cemetery
Exhibition
Veterans’
Organizations
Public Libraries
Free Museums
Schools,
Colleges,
Universities
Religious
Amount of
Exemption
$100,000
One Time
Due
Date
2/15
80%, if by 12/10
Retroactive for
Prior Tax Years
No
$150,000
Annual
2/15
80%, if by 12/10
No
$7,000
$4,000
Generally
100%,
sometimes
partial
exemption
provided
where part
of property
is eligible.
One Time
Annual
Annual
2/15
2/15
2/15
80%, if by 12/10
80%, if by 12/10
90%, if filed on or
before January 1 of
the next calendar
year.*
No
No
Yes
Generally
100%.
Filing
Late Filing
85%, if filed after
January 1 of the
next calendar year.*
One Time
2/15
*But not more than
$250 is to be
charged for those
years that taxes can
be canceled or
refunded.
Same as above.
If taxes were
paid; four years
of refunds.
If taxes were not
paid; taxes may
be canceled for
an unlimited
number of years.
Same as above.
5
For persons who have qualified for the exemption in or before 1983, the income limit is $34,000; for
persons who became qualified after 1983 the income limit is reduced to $24,000.
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Background:
In 1998, the homes of 15,563 persons received the disabled veterans’ exemption. The
10 counties with the most homes receiving the exemption include: San Diego (2,813),
Los Angeles (1,359), Sacramento (1,136), Riverside (888), Orange (848), Solano (769),
San Bernardino (734), Monterey (669), Contra Costa (501), and Alameda (466).
Comments:
1. Purpose. To permit retroactive exemptions in the specific instance where a
veteran will eventually receive a 100% disability rating with a back dated
effective date.
2. Key Amendments. The June 29 amendments reflect technical cleanup changes
that were suggested in the prior analysis. The May 3 amendments reflect
changes requested by the consultants to the Assembly Revenue and Taxation
Committee to directly connect the provisions of the Military and Veterans Code,
which this bill adds, to the pertinent sections of Revenue and Taxation Code that
provide the disabled veterans’ exemption for property tax purposes.
3. This Bill Permits Retroactive Exemptions for Prior Tax Years. Under current
law, the disabled veterans’ exemption can not be granted for any year unless a
claim is filed on or before December 10 of that tax year. For those persons
awaiting a disability rating, the exemption is available on a prospective basis
once the rating is received. This bill effectively permits the disabled veterans’
exemption to be retroactively granted, as specified, for prior tax years. If taxes
on the property were paid prior to receiving the disability rating, the number of
prior tax years for which the exemption could be granted retroactively would be
generally limited to four. Revenue and Taxation Code Section 5096 provides that
a claim for refund must be filed within four years after making the payment.
Thus, in practice, the exemption may not always be granted to the effective date
of the disability rating. There is no statute of limitation placed on the cancellation
of unpaid taxes otherwise permitted by law. Consequently, if taxes were not
paid in prior years, there would be no limit to the number of years that may be
canceled6.
4. In practice, it can take many years for a veteran to receive a disability rating
from the USDVA, especially where the veteran has appealed their rating.
Some disabled veterans are uninformed of the exemption until after their
disability claim is approved by the USDVA and they receive educational material
on the benefits available to disabled veterans. For those aware of the exemption,
but awaiting their disability rating, some counties have adopted an
administrative practice where they accept the filing of a “protective claim” each
year. This administrative practice allows the county to grant the exemption once
6
In practice, action would commence to sell tax-defaulted property after five years of non-payment.
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the disability rating is received, since technically the claim for each tax year was
filed “timely”. But this remedy is only helpful for those persons who previously
have consulted with their local county assessor. Other counties may not accept
or suggest “protective” claims.
5. Related Legislation. SB 1362 (Poochigian) adds Section 276.1 to the Revenue and
Taxation Code to similarly provide retroactive exemptions for disabled veterans
who were awaiting their disability rating from the USDVA.
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Assembly Bill 2562 (Brewer) Chapter 922
Disabled Veterans’ Exemption
Late Filing
Portability
Tax levy; effective September 29, 2000. Adds Sections 276.2 and 276.3 to, and
repeals and adds Section 276 of, the Revenue and Taxation Code.
This bill, with respect to the disabled veterans’ exemption:
• Permits retroactive exemptions for prior tax years for any eligible person who
did not file a claim in that tax year, (§276)
• Increases the amount of the partial exemption granted on claims that are filed
late, but on or before December 10th of the current tax year, from 80% to 90%,
(§276) and
• Immediately terminates and transfers the exemption from one home to
another. (§276.2, §276.3)
Sponsor: Orange County Assessor
Late Filing
Revenue and Taxation Code Section 276
This bill repeals the current provisions related to the amount of the exemption
granted to a disabled veteran who files a claim for a 100% exemption, after the
final filing date which is February 15. In effect, the new provisions would permit
a partial exemption, at 85%, to be granted for prior tax years, subject to the
limitations on refunds, on property for which the exemption would have been
available but for the taxpayer’s failure to file a claim. Additionally, for a claim
filed between February 16 and December 10, it would increase the amount of the
partial exemption from 80% to 90%.
Law Prior To Amendment:
The disabled veterans’ exemption is generally available in two amounts7:
•
$100,000 for qualified persons, hereafter referred to as the “basic exemption”
which is provided on a one time filing basis, and
In practice, despite the apparent distinction made in existing law that the amount of the exemption
varies according to the type of disability, virtually all claimants meet the “totally disabled”
classification. To simplify this discussion, the remainder of the analysis will refer to either the
$100,000 basic exemption or the $150,000 low income exemption.
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$150,000 for qualified persons with low incomes, as specified, hereafter referred
to as the “low income exemption” which requires a first time filing and
subsequent annual filings to reaffirm income eligibility.
With respect to property tax exemptions that require claims, Article XIII, Sec. 6 of the
California Constitution provides that the failure in any year to claim, in a manner
required by the laws in effect at the time the claim is required to be made, an
exemption which reduces a property tax shall be deemed a waiver of the exemption
for that year.
For both levels of disabled veterans’ exemption, first time filings for the basic
exemption and first time filings or annual re-filings for the low income exemption, a
claim must be filed between the lien date (January 1) and February 15 to receive the
full amount of the exemption on the upcoming tax bill for the ensuing fiscal year
(July 1 – June 30). If a claim is filed between February 16 and December 10, 80
percent of the exemption is available. If a claim is not made on or before December
10, which is the date the first installment of the property tax bill becomes delinquent,
then the exemption may not be applied to taxes owing for that fiscal year. For
annual re-filings of the $150,000 low income exemption, where a claim is not made
on or before December 10, the exemption would not be lost completely, but would
instead be reduced to the basic exemption level of $100,000.
The following table summarizes the filing provisions for the disabled veterans’
exemption under prior law.
Exemption
Amount of
Exemption
Basic
Exemption
$100,000
Low Income
Exemption
$150,000
™ 24
Filing
Reqs.
One
Time
Only
Annual
Refiling
L
Claim
Filed By
2/15
$1,000
Claim Filed
Between
2/16 and 12/10
$800
(1000 x 80%)
$1,500
$1,200
(1,500 x 80%)
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B
Claim Filed
After
12/10
$0 for
current tax
year
$0 for
current tax
year
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No
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The following table summarizes the late filing provisions under the new law.
Exemption
Amount of
Exemption
Filing
Reqs.
Basic
Exemption
$100,000
One
Time
Only
Low Income
Exemption
$150,000
Annual
Refiling
Claim
Filed By
2/15
$1,000
Claim Filed
Between
2/16 and 12/10
$900
(1000 x 90%)
Claim Filed
After
12/10
$850
(1,000 x 85%)
for current tax
year
$1,500
$1,350
(1,500 x 90%)
$1,275 (1,500 x
85%) for
current tax
year
Refund Prior
Tax Years
Yes, refund
up to four
prior tax
years @ $850
per year
Yes, refund
up to four
prior tax
years @
$1,275 per
year
In General:
Disabled Veterans’ Exemption. Section 4(a) of Article XIII of the California
Constitution grants the Legislature the authority to exempt from property tax, in
whole or in part, the home of a person (or a person’s spouse) who is injured in
military service. This exemption is commonly referred to as the “disabled veterans’
exemption.” Injuries that qualify a veteran for the exemption include: 1) total
disability, 2) blindness and 3) lost use of two or more limbs. The spouse of a
disabled veteran is able to maintain the exemption after the veteran’s death as long
as the spouse is unmarried. Additionally, since 1994, the unmarried spouse of a
person who, as a result of a service-connected injury or disease, dies while on active
duty is able to qualify for the disabled veterans’ exemption.
Section 205.5 of the Revenue and Taxation Code implements the Legislature’s
authority to provide a property tax exemption for disabled veterans and/or their
unmarried surviving spouses. As noted in the table below, the amount of the
exemption depends upon 1) type of injury and 2) household income.
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Current law establishes, until January 1, 2001, the following exemption amounts:
Disability Type
•
•
•
•
Basic Exemption
Low Income Exemption8
$40,000
$60,000
$100,000
$150,000
Blind9
Lost Two or More
Limbs10
Totally Disabled
Active Duty Death
Late Filing Provisions. For comparison purposes, the following table summarizes
the late filing provisions for various property tax exemptions where a claim must be
filed to receive the exemption.
Summary of Late Filing Provisions For Various Exemptions
Exemption
Amount of
Exemption
Filing
Due
Date
Late
Filing
Retroactive for
Prior Tax Years
Disabled Veterans’
Basic
Disabled Veterans’
Low Income
Homeowners’
Veterans’
$100,000
One Time
2/15
80%, if by 12/10
No
$150,000
Annual
2/15
80%, if by 12/10
No
$7,000
$4,000
One Time
Annual
2/15
2/15
80%, if by 12/10
80%, if by 12/10
No
No
8
For persons who have qualified for the exemption in or before 1983, the income limit is $34,000; for
persons who became qualified after 1983 the income limit is reduced to $24,000.
9 The Veterans’ Administration defines these injured veterans as “totally disabled” thus they instead
may qualify for the $100,000 or $150,000 exemption.
10 The Veterans’ Administration defines these injured veterans as “totally disabled” thus they instead
may qualify for the $100,000 or $150,000 exemption.
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Summary of Late Filing Provisions For Various Exemptions
Welfare
Church
Cemetery
Exhibition
Veterans’
Organization.
Public Libraries
Free Museums
Schools,
Colleges,
Universities
Generally
100%;
sometimes
partial
exemption
provided
where part of
property is
eligible.
Annual
2/15
90%*, if filed on
or before
January 1 of the
next calendar
year.*
Yes
85%*, if filed
after January 1
of the next
calendar year.*
If taxes were not
paid; taxes may
be canceled for an
unlimited number
of years.
If taxes were paid;
four years of
refunds.
*But not more
than $250 is to
be charged for
those years that
taxes can be
canceled or
refunded.
Religious
Generally
100%.
One Time
2/15
Same as above.
Same as above.
Background:
In 1998, the homes of 15,563 persons received the disabled veterans’ exemption. The
10 counties with the most homes receiving the exemption include: San Diego (2,813),
Los Angeles (1,359), Sacramento (1,136), Riverside (888), Orange (848), Solano (769),
San Bernardino (734), Monterey (669), Contra Costa (501), and Alameda (466).
Comments:
1. Purpose. To permit retroactive exemptions for prior tax years, which is not
permitted under existing law.
2. Key Amendments. The June 29 amendments conforms the changes made to
Section 276 with those made by SB 1362 (Poochigian), which also makes similar
changes to Section 276 with respect to permitting a partial exemption for late
filing for prior tax years.
3. Under current law, the disabled veterans’ exemption cannot be granted unless
a claim is filed on or before December 10 of the current tax year. Article XIII,
Section 6 provides that failure to file a claim for an exemption is deemed a
wavier of the exemption for that year. Generally the filing deadline for the
disabled veterans’ exemption is relevant only when a claim is made for the first
time, since a claim for the basic exemption need only be filed once to receive the
exemption for all future tax years. (For the low income exemption of $150,000,
claimants must file annually to verify income. If a timely claim is not made, they
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do not lose the exemption completely, but they drop down to the basic
exemption amount of $100,000.)
4. This bill conforms, in essence, the late filing provisions for the disabled
veterans’ exemption with those provided for various non-profit agencies and
governmental properties. The current late-filing provisions for disabled
veterans’ exemptions are identical to those for the homeowners’ exemption and
the veterans’ exemption. These exemptions may not be granted retroactively for
prior tax years if a claim was not filed for those years. However, statutory law
does permit retroactive exemptions for prior years for other exemptions.
Specifically, the welfare, church, religious, public schools, colleges, community
colleges, state colleges, state universities, free public libraries, exhibition, free
museums, veterans’ organizations, and cemeteries exemption. The mechanism
for granting the exemption retroactively is by means of a “partial exemption” for
“late-filing.” This bill establishes similar provisions for the disabled veterans’
exemption.
5. This bill effectively permits the disabled veterans’ exemption to be
retroactively granted, at 85%, for up to four prior tax years, generally by means
of refunding taxes previously paid. Because of the pre-existing statute of
limitations on making refunds, the number of prior tax years where the partial
exemption could be granted would be limited. Revenue and Taxation Code
Section 5096 provides that a claim for refund must be filed within four years after
making the payment. There is no statute of limitations placed on the cancellation
of taxes otherwise permitted by law. Consequently, if taxes were not paid in
prior years, there would be no limit to the number of years that may be
canceled11.
6. This measure provides relief to those persons who were eligible for the
exemption, but were unaware of the program. Some homeowners, particularly
the unmarried surviving spouses of persons who died while on active duty, are
unaware that they are eligible for this exemption. These spouses were not
eligible for the exemption until a 1992 constitutional amendment (Proposition
160). In addition, in practice it can take many years for a veteran to receive a
disability rating from the USDVA, especially when the veteran has appealed
their rating. Some disabled veterans are uninformed of the exemption until after
their disability claim is approved by the USDVA and then receive educational
material on the benefits available to disabled veterans. (Other bills in this
legislative session address this specific instance, of delayed disability ratings, AB
2092 (Reyes) and SB 1362 (Poochigian).
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7. This bill would increase the amount of the exemption for claims filed late, but
in the current tax year, by 10 percent. This bill would increase the partial
exemption amount by 10 percent (from 80% to 90%) for claims filed after
February 15 but on or before December 10.
Portability
Revenue and Taxation Code Section 276.2, 276.3
This provision allows a disabled veteran to receive the full amount of the
exemption in any year in which they move from one home to another.
Sponsor: Assembly Member Marilyn Brewer
Law Prior To Amendment:
Under current law, if a disabled veteran changes their principal place of residence
on or after the lien date (January 1), the exemption does not terminate on the first
home for the ensuing fiscal year (July 1 – June 30). The exemption is not allowed on
the new residence until a claim is filed on the new residence or before February 15 or
within 30 days of notice of supplemental assessment for the new residence,
whichever occurs first.
In General:
There are two alternatives by which a disabled veterans’ exemption may be granted:
Alternative 1: The exemption is available to an eligible owner of a dwelling which is
occupied as the owner’s place of residence as of 12:01 a.m. January 1 each year. The
full exemption is available if a claim is filed on or before February 15, or
Alternative 2: The exemption is available to an eligible owner of a dwelling subject
to Supplemental Assessment(s) resulting from a change in ownership or new
construction on or after January 1 provided,
(a) The owner occupies or intends to occupy the property as his or her principal
place of residence with 90 days after the change in ownership or completion
of new construction and,
(b) The property is not already receiving the disabled veterans’ exemption or
another property tax exemption of greater value. If the property received an
exemption of a lesser value on the current roll (most often the case, the
property is receiving a $7,000 homeowners’ exemption), the difference in the
amount between the two exemptions shall be applied to the Supplemental
Assessment.
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The full exemption (up to the amount of the supplemental assessment)12, if any, is
available if a claim is filed by the 30th day following the Notice of Supplemental
Assessment issued as a result of a change in ownership or completed new
construction. If a claim is filed after the 30th day following the Notice of
Supplemental Assessment, but on or before the date which the first installment of
the supplemental tax bill becomes delinquent, 80 percent of the available exemption
may be allowed.
An exemption under Alternative 2 will apply to the Supplemental Assessment(s), if
any, and the full exemption will be allowed for the following fiscal year(s).
Comments:
1. Purpose. To ensure that a person qualified for the disabled veterans’ exemption
can immediately receive the full amount of exemption on the new residence.
2. Key Amendments. The June 29 amendment renumbers Section 276.1 to Section
276.2 and adds Section 276.3 to clarify that the exemption immediately
terminates on the vacated property in conformity to similar amendments made
by SB 1362 (Poochigian), which also makes similar changes with respect to
portability of the exemption.
3.
This measure ensures that a person who qualifies for the disabled veterans’
exemption may immediately transfer the exemption from one home to another.
Under current law, it is possible that a person who purchases a home previously
owned by a person who was receiving the disabled veterans’ exemption will
enjoy the property tax exemption for the remainder of the tax year, whereas the
disabled veteran is unable to obtain the full amount of the exemption on their
new residence the first year of its purchase. This measure corrects this
possibility.
4. This measure provides that in the event that property receiving a disabled
veterans' exemption as described in Section 205.5 is sold or otherwise
transferred to a person who is not eligible for that exemption, the exemption
shall cease to apply on the date of that sale or transfer. Thus the new owner will
no longer benefit from the disabled veterans exemption.
12
For example, although the person would be entitled to a $100,000 exemption, the supplemental
assessment may be for an amount less than $100,000.
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Assembly Bill 2612 (Brewer) Chapter 607
Intercounty Pipeline Rights-of-Way
Effective January 1, 2001. Amends Section 401.10 of the Revenue and Taxation Code.
Extends, from January 1, 2001 to January 1, 2011, specified property tax assessment
procedures for intercounty pipeline rights-of-way.
Sponsor: California Manufacturers and Technology Association
Law Prior To Amendment:
Commencing in 1993, assessors were required to begin to assess intercounty pipeline
rights-of-ways after a court ruling held that the prior assessment of these rights by
the Board of Equalization was outside of its jurisdiction. The property tax collected
on the Board assessments were to be refunded and county assessors were to instead
levy escape assessments retroactively to the 1984-85 tax year based on their own
determinations as to the value of these interests. Existing law, Section 401.10 of the
Revenue and Taxation Code, reflects an agreement reached in 1996 between county
assessors and intercounty pipeline rights-of-way owners to set forth the assessment
methodology for this assessment transition. These procedures have been used to
determine the assessed value of intercounty pipeline rights-of-way for the 1984-85
through 2000-01 tax years. When this methodology is followed, the value so
determined is rebuttably presumed to be correct. Section 401.10 is repealed by its
own provisions on January 1, 2001. The agreement also sets forth, in Section 401.11,
the treatment of tax refunds and escape assessments, as applicable for purposes of
the assessment transition. Section 401.11 was repealed by its own provisions on
January 1, 2000.
In General:
Intercounty pipeline rights-of-way, for tax years 1984-85 through 2000-01, may be
assessed according to a prescribed dollars-per-mile schedule that determines value
according to the “density classification” of the property as follows: $20,000 per mile
for high density, $12,000 per mile for transitional density, and $9,000 per mile for
low density. When a county assessor uses this methodology to value pipeline
rights-of-way the property owner is precluded from challenging the legality of the
assessment. If the methodology is not followed, then the property owner may
challenge the legality of the assessment and the assessor’s presumption of
correctness is negated.
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Background:
Intercounty pipeline rights-of-way were assessed by the Board from 1982 until 1993.
In 1993 an appellate court ruled that, while the pipelines themselves are properly
assessed by the Board, the rights-of-way through which the pipelines run were
outside of the Board’s assessment jurisdiction. Instead, county assessors were
directed to make these assessments. (Southern Pacific Pipe Lines, Inc. v. State Board of
Equalization 14 Cal.App.4th 42) A pivotal issue giving rise to this litigation is that
property assessed by the Board is not subject to the assessment limitations of
Proposition 13. Board assessed property is reassessed each year at current fair
market value, whereas property assessed by the county assessor is assessed at the
base year value (year of acquisition), increased by the annual 2%-maximum
inflation factor. Pipeline operators naturally preferred assessment at the local level.
As a result of the court case, taxes collected based on Board assessments were to be
refunded. County assessors were to value these interests and levy escape
assessments for the tax years 1984-85 and forward. (In practice, whether the
property is valued by the Board or the county assessor, the county collects the taxes
as well as distributes the resulting revenue to other local governments. ) The
intercounty nature of these interests made the valuation process difficult under
traditional local assessment procedures. In addition, uniform valuation of these
interests by the 58 local counties was lacking. To avoid protracted litigation over
these assessments, pipeline owners and counties negotiated the assessment
methodology outlined in Section 401.10 and escape assessment/refund process of
401.11, which was subsequently codified by AB 1286 (Ch. 801, Takasugi, Stats. 1998).
Comment:
Purpose. To extend the assessment methodology provision for intercounty pipeline
rights of way which has been proven to work well.
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Assembly Bill 2891 (Committee on Revenue & Taxation ) Chapter 646
Property Tax Omnibus Bill
Effective January 1, 2001. Amends Sections 75.11, 75.21, 532, 731, 732, 733, 746,
748, 749, 758, and 759 of the Revenue and Taxation Code.
This Board of Equalization sponsored bill contains provisions to:
1. Restore a limitation on the number of escape assessments that may be levied
for prior tax years, except in cases of fraud or changes in ownership involving
property owned by a legal entity if a change in ownership statement is not
filed. (§§75.11 and 532).
2. Restore language that was inadvertently deleted by SB 2237 (Stats. 1998, Chap.
591) related to permitting a partial exemption to be granted on late filed claims
for the veterans', homeowners', and disabled veterans' exemptions on a
supplemental assessment. (§75.21)
3. Simplify the petition filing deadlines for appeals of assessments and
allocations of state-assessed properties. (§§731, 732, 733, 746, 748, 749, 758, and
759)
These provisions are also contained in, and were chaptered out by, Senate Bill
2170 (Committee on Revenue and Taxation) Chapter 647. See page 64 for details
on the provisions of that bill.
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Assembly Bill 2898 (Committee on Revenue & Taxation) Chapter 1052
Private Railroad Car and Timber Yield Taxpayers Bill of Rights
Effective January 1, 2001. Amends Sections 11253, 11597, 38452, and 38504, and
adds Sections 11253.5, 11453, 11553.5, 11656, 11657, 38503.5, 38504.5, 38602.5,
38707, and 38708, to, the Revenue and Taxation Code.
For the Private Railroad Car Tax program and the Timber Yield Tax program, this
Board of Equalization-sponsored bill:
•
•
Authorizes the Board to establish criteria to provide relief of the late payment
penalty in a more efficient manner.
Provides relief to a taxpayer whose employer withheld delinquent taxes or
fees from the taxpayer’s pay, but failed to remit the amounts to the Board.
•
Provides relief of the late payment penalty in cases where the taxpayer enters
into and successfully complies with an installment payment agreement.
•
Prohibits the disclosure of confidential taxpayer information by tax preparers.
•
Changes the effective date for which reimbursement of fees and expenses may
be awarded so that taxpayers may claim reimbursement commencing from the
date the notice of determination, jeopardy determination, or denial of claim
for refund is issued.
•
Suspends the statute of limitations on filing refund claims during periods of
disability.
•
Requires the Board to provide annual statements summarizing the payment
and liability information to taxpayers who have entered into installment
payment agreements.
Background:
The Harris-Katz California Taxpayers’ Bill of Rights was enacted in 1988 (Ch. 1574),
effective January 1, 1989, to place certain guarantees in the California Sales and Use
Tax Law to ensure that the rights, privacy, and property of California taxpayers are
adequately protected during the process of the assessment and collection of taxes.
The Katz-Harris Taxpayers’ Bill of Rights, also enacted in 1988, placed similar
guarantees in the California Personal Income Tax Law and the Bank and
Corporation Tax Law. Conforming taxpayer rights were added to the Boardadministered Special Taxes programs in 1992 by Chapter 438.
On July 30, 1996, Congress enacted the federal Taxpayer Bill of Rights 2 to provide
an additional set of taxpayer protections under the federal income tax laws. As a
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conformity measure, the Franchise Tax Board sponsored AB 713 (Ch. 600, Stats.
1997) to conform many of its bill of rights provisions to the 1996 federal changes.
In 1998, the Board sponsored Assembly Bill 821 (Ch. 612, Takasugi) to conform
California sales and use tax laws to the Franchise Tax Board’s AB 713. Effective
January 1, 1999, AB 821 expanded, modified and supplemented the Katz-Harris
Taxpayers’ Bill of Rights Act with respect to relief of interest, installment payment
agreements, interest on erroneous refunds, education and information programs,
reimbursement of certain fees and expenses, return of levied property, and release of
liens to facilitate collection or when it is in the best interest of the state and taxpayer.
Also in 1998, Congress enacted the Internal Revenue Service Restructuring and
Reform Act of 1998. In addition to providing for a massive reorganization of IRS
and the way it does business, this Act included various taxpayer rights protections,
including greater relief of liability for innocent spouses, statute of limitations relief
for financially disabled taxpayers, increased tax agency notification requirements,
and many others.
In 1999, California conformed its Sales and Use Tax and Personal Income and Bank
and Corporation Tax Laws to several of the taxpayer rights provisions in the IRS Act
through the enactment of AB 1638 (Chapter 929, Statutes of 1999) and SB 94 (Chapter
931, Statutes of 1999).
Late Payment Penalties
Revenue and Taxation Code Section 11597, 38452
Authorizes the Board to establish criteria to provide relief of the late payment
penalty in a more efficient manner.
Law Prior To Amendment:
Under Section 6592 of the Sales and Use Tax Law, and similar statutes in the Board’s
special taxes and fees program, the Board is authorized to relieve persons of the
penalty imposed for a person’s failure to make a timely return or payment, when the
Board finds that the failure was due to a reasonable cause. To be relieved of the
penalty, the law requires that the person seeking relief file a statement under penalty
of perjury setting forth the facts upon which his or her claim for relief is based.
Comment:
This provision enables the Board to establish criteria that would allow for a more
efficient process to provide relief of penalty, by for example, eliminating the
requisite statement under penalty of perjury from the person seeking relief under
the established criteria.
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Employer Withheld Taxes
Revenue and Taxation Code Section 11453, 38503.5
Provides relief to a taxpayer whose employer withheld delinquent taxes or fees
from the taxpayer’s pay, but failed to remit the amounts to the Board.
Law Prior To Amendment:
Under Section 6703 of the Sales and Use Tax Law, and similar statutes in the Board’s
other tax and fee programs, if a retailer or other person liable for the tax is
delinquent in his or her payment of amounts due, the Board is authorized to take
administrative collection action. One such action is the issuance of earnings
withholding orders for taxes or fees pursuant to the Code of Civil Procedure. These
orders require employers to withhold delinquent taxes or fees from an employee’s
earnings and remit the withheld amount to the Board. This situation arises when
the taxpayer, at the time of this action, is employed by another, as for example, a
purchaser of an aircraft who is delinquent in his or her payment of use tax to the
Board. In cases where the employer fails to remit the withheld amount to the Board,
the employee continues to remain liable to the Board for the amounts withheld and,
other than obtaining a civil action against the employer, the Board has no authority
to take administrative collection action against the employer. Under existing law,
the Board has no authority to credit the account of the tax or feepayer for the
amount the employer withheld and failed to remit. In addition, the Board does not
have authority to stop collection action against the tax or feepayer.
Comment:
This provision, which is consistent with the authority granted to the Franchise Tax
Board by SB 94 (Ch. 931, Stats. 1999), provides relief to a tax or feepayer whose
employer withheld delinquent taxes or fees from the tax or feepayer’s pay pursuant
to an earnings withholding order, but failed to remit the amounts to the Board.
Specifically, this provision:
•
Eliminates the tax or feepayer’s liability for the unremitted amount by allowing
the Board to credit the taxpayer’s account for the unremitted amount.
•
Holds the employer liable for the unremitted amount by allowing the Board to
administratively assess an amount equal to the unremitted amount against the
employer.
•
Stops collection action against the tax or feepayer for the amount.
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Installment Payment Agreements – Late Payment Penalties
Revenue and Taxation Code Section 11253, 38504
Provides relief of the late payment penalty in cases where the taxpayer enters into
and successfully complies with an installment payment agreement.
Law Prior To Amendment:
Under current law, the Board may enter into a written installment payment
agreement with a person for the payment of any taxes or other amounts due over an
agreed period. Generally, if a taxpayer is late in payment of those taxes, a penalty of
10% of the tax is added.
Comment:
This proposal provides that, if a person entered into a written installment payment
agreement with the Board within 45 days of the date of the Board’s notice of
determination or redetermination becomes final, the taxpayer may be relieved of the
late payment penalty, provided the taxpayer satisfactorily completes the installment
payment proposal.
Confidential Taxpayer Information – Tax Preparers
Revenue and Taxation Code Section 11656, 38707
Prohibits the disclosure of confidential taxpayer information by tax preparers.
Law Prior To Amendment:
Among the inalienable personal rights listed in Article I of the California
Constitution, is the right to privacy. Consistent with this provision, current law
prohibits the Board and its employees from divulging confidential information
about the business affairs of taxpayers registered with the Board. Any violation of
these laws is a misdemeanor, punishable by a fine of not less than $1,000 and not
more than $5,000, or imprisonment not to exceed one year in the county jail, or both
a fine and imprisonment, at the discretion of the court. Current law does not
prohibit tax preparers from divulging tax or fee information relating to taxes and
fees collected by the Board.
Comment:
This provision, which is consistent with Section 7216 of the United States Code for
purposes of the Federal Income Tax Law, and Section 17530.5 of the Business and
Professions Code for purposes of federal or state income tax returns, makes it a
misdemeanor for any person who is engaged in the business of preparing or
providing services in connection with the preparation of Board-administered tax or
fee returns, to disclose any information furnished to him or her for, or in connection
with the preparation of any such return, or to use any such information for any
purpose other than to prepare, or assist in preparing, any such return.
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Fee and Expense Reimbursement
Revenue and Taxation Code Section 11657, 38708
Changes the effective date for which reimbursement of fees and expenses may be
awarded.
Law Prior To Amendment:
Under current law, a taxpayer is entitled to be reimbursed for any reasonable fees
and expenses related to a hearing before the Board if the Board finds that the action
taken by the Board staff was unreasonable. Under existing provisions, the amount
of reimbursed fees and expenses is limited to the fees and expenses incurred after
the date of the filing of the petitions for redetermination and claims for refund.
Comment:
This provision, which conforms to the Franchise Tax Board’s SB 94 (Ch. 931, Stats.
1999), changes the effective date from which reasonable fees and expenses may be
granted, from the date the petition or claim for refund is filed to the date the notice of
determination is issued.
Refund Claims - Disability
Revenue and Taxation Code Section 11553.5, 38602.5
Suspends the statute of limitations on filing refund claims during periods of
disability.
Law Prior To Amendment:
Under both the IRS Restructuring and Reform Act of 1998 and the Sales and Use Tax
Law, as added by AB 1638 (Stats. 1999, Ch. 929), a taxpayer is allowed equitable
tolling of the statute of limitations for refund claims during any period in which the
individual is unable to manage his or her financial affairs by reason of a medically
determinable physical or mental impairment expected to result in death or to last for
a continuous period of not less than 12 months. However, tolling does not apply for
periods in which the taxpayer’s spouse or another person is authorized to act on the
taxpayer’s behalf on financial matters.
Current law specifies the period in which claims for refund are required to be filed
for any overpayments. The Board’s tax programs require a claim for refund to be
filed no later than three years from the due date of the return (four years under the
Private Railroad Car Tax Law), or six months from the date of the overpayment,
whichever period expires later. Current law does not provide for equitable tolling
under any circumstances.
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Comment:
The Board’s conformance to the Act provides equitable relief for those taxpayers that
qualify, and would not likely result in a significant increase in staff workload or loss
in revenues.
Installment Payment Agreements – Annual Statement
Revenue and Taxation Code Section 11253.5, 38504.5
Requires the Board to provide annual statements to taxpayers who have entered
into installment payment agreements.
Law Prior To Amendment:
Under both the IRS Restructuring and Reform Act of 1998 and the Sales and Use Tax
Law, as added by AB 1638 (Stats. 1999, Ch. 929), the IRS and Board are required to
provide an annual statement to every taxpayer with an installment agreement
indicating the initial balance at the beginning of the year, the payments made during
the year, and the remaining balance at the end of the year.
AB 1638 also granted authorization to the Board to enter into installment payment
agreements with taxpayers under the Special Taxes, Private Railroad Car Tax, and
the Timber Yield Tax programs. Statutory conformance with the Act and the Sales
and Use Tax Law would enhance the Board’s services to taxpayers who have
entered into these agreements by requiring the Board to provide clear explanations
of accrued interest and penalties on their respective tax liabilities. It would also
allow taxpayers to clearly track their remaining outstanding liabilities with the
Board of Equalization.
Comment:
Although the Board intends to provide taxpayers with this type of information on
their installment payment plans without a statutory requirement, it is necessary to
add these provisions to the law in order to provide taxpayers with legal certainty. It
should be noted that these provisions do not apply to taxes due under the Motor
Vehicle Fuel License Tax Law, since those taxes are collected by the State Controller
and not the Board.
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Senate Bill 383 (Haynes) Chapter 693
Erroneously Granted Proposition 110 Claims
Tax levy, effective September 27, 2000. Amends Section 69.5 of the Revenue and
Taxation Code.
Prohibits escape assessments for prior years taxes when intercounty base year
value transfers are erroneously granted by the assessor.
Sponsor: Senator Ray Haynes
Law Prior To Amendment:
Revenue and Taxation Code Section 69.5 provides generally that any person over the
age of 55 years, or any person who is severely and permanently disabled, may
qualify for relief from provisions of law that would otherwise require a
reassessment of a newly acquired residence to current market value. Section 69.5
provides such relief by allowing an eligible claimant to transfer, one time only, the
existing base year value of a sold residence (“original property”) to the new
residence (“replacement dwelling”) as long as both residences are located in the
same county and the new residence is of equal or lesser value. The law permits that
a claimant may transfer their base year value to a newly acquired residence that is
located in another county, but only if the county board of supervisors of the receiving
county has adopted an ordinance accepting such base year value transfers.
Currently, only 10 of the 58 counties have opted to grant intercounty base year value
transfers: Alameda, Kern, Los Angeles, Modoc, Monterey, Orange, San Diego, San
Mateo, Santa Clara, and Ventura. Four other counties have had ordinances which
are no longer in effect: Contra Costa (repealed 11-8-93), Inyo (repealed 10-13-94),
Riverside (repealed 7-1-95), and Marin (repealed 1-16-97).
In General:
California's system of property taxation under Article XIIIA of the State Constitution
(Proposition 13) values property at its 1975 fair market value, with annual increases
limited to the amount of inflation or 2%, whichever is less, until the property
changes ownership or is newly constructed.
At the time of the ownership
change or new construction, the value of the property for property tax purposes is
redetermined based on current market value. The value initially established, or
redetermined where appropriate, is referred to as the "base year value." Thereafter,
the base year value is subject to annual increases for inflation. This value is referred
to as the "factored base year value."
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Proposition 60 (1986) amended the constitution to authorize the Legislature to
provide an exception to the general requirement that property be reassessed to
current market value by providing for a one-time transfer of base year value from a
former principal place of residence to a replacement dwelling, under certain
conditions, by qualified persons who are over the age of 55 years. Proposition 90
(1988) further amended the constitution to authorize such base year value transfers
to replacement dwellings located in another county, provided the county board of
supervisors of that county adopts an ordinance accepting such transfers.
Proposition 110 (1990) extended these base year value provisions to persons who are
severely and permanently disabled.
Comments:
1. Purpose. To alleviate potentially serious hardship facing disabled homeowners,
many of whom live on a low, fixed income in Riverside County, and who will
have to pay up to four years of additional property taxes, via escape assessments,
because the assessor’s office erroneously granted them an intercounty base year
value transfer under a previously repealed Proposition 90 ordinance.
2. This measure is intended to address a specific instance in Riverside County.
Riverside County’s Proposition 90 ordinance accepting intercounty base year
value transfers was repealed effective July 1, 1995. However, some staff
members believed that the repeal of the county’s ordinance only affected
intercounty transfers, available to persons who are over the age of 55 years, and
that intercounty transfers, available to disabled persons regardless of age under
Proposition 110, were still permitted. The county recently discovered this error
and contacted those taxpayers to inform them that the previously granted base
year value transfers would be revoked and that escape assessments would be
levied for prior years.
3. This bill ensures that taxpayers mistakenly granted base year value transfers
will not have to pay additional property taxes for prior tax years prohibiting
escape assessments in these limited circumstances. This measure holds these
taxpayers harmless for such back taxes. However, the assessed values of these
homes will be corrected on a prospective basis beginning with the January 1,
2000 lien date.
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Senate Bill 1362 (Poochigian) Chapter 1085
Disabled Veterans’ Exemption
Low Income Threshold
Exemption Amount Simplification – Disability Type
Late Filings
Generally
Delayed Disability Rating
Portability
Tax levy, effective September 30, 2000. Amends and repeals Section 205.5 of, adds
Sections 276.1, 276.2, and 276.3 to, and repeals and adds Section 276 of, the
Revenue and Taxation Code.
This bill, with respect to the disabled veterans’ exemption:
• raises the income threshold and provides for automatic annual increases for
the low income exemption, (§205.5)
• deletes the multiple levels of exemption for disability type, (§205.5)
• permits partial retroactive exemptions for any eligible person who did not file
a claim, (§276)
• permits full retroactive exemptions for veterans awaiting a disability rating,
(§276.1) and
• immediately terminates and transfers the exemption from one home to
another. (§276.2, §276.3)
Sponsor: Senator Charles Poochigian
Low Income Threshold
Exemption Amounts Simplification - Disability Type
Revenue and Taxation Code Section 205.5
This bill deletes the current income threshold reference to Section 20585, which
provides limits of either $24,000 or $34,000, and instead provide an income limit of
$40,000. The income limits would be annually increased, beginning in 2002, by an
inflation factor, as measured by the California Consumer Price Index for all items.
Law Prior To Amendment:
The disabled veterans' exemption applies to the home of a qualified veteran or their
surviving unmarried spouse. Depending on the nature of the disability and also the
veteran’s income, the law provides for an exemption in the amount of $40,000,
$60,000, $100,000, or $150,000 of the full cash value of the property, as noted in the
table below. In practice, the disabled veterans’ exemption is generally granted in
either $100,000 or $150,000 amounts. This is because, although the law specifies a
different exemption amount for veterans who are blind or who have lost the use of
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two or more limbs, the Veterans’ Administration classifies these injuries as total
disability, qualifying the veteran for the higher exemption amount.
Exemption amounts are higher for claimants who have a household income below
the amounts specified in Revenue and Taxation Code Section 20585, which sets forth
the maximum income levels for eligibility in the Senior Citizens and Disabled
Citizens Property Tax Postponement program administered by the State Controller’s
Office. For persons who have qualified for the program in 1983, Section 20585 sets
an income limit of $34,000; for persons who became qualified after 1983 the income
limit is reduced to $24,000.
Previously the law established, until January 1, 2001 the following exemption
amounts:
Disability Type
•
•
•
•
Blind13
Lost Two or More
Limbs
Totally Disabled
Active Duty Death
Basic Exemption
Low Income
Exemption
($24,000 or $34,000)
$40,000
$60,000
$100,000
$150,000
Beginning January 1, 2001, the exemption amount for virtually all persons who are
receiving the exemption will be reduced to $40,000, or to $60,000 for persons with
household incomes below either $24,000 or $34,000, as specified.
Disability Type
•
•
•
•
Blind
Lost Two or More
Limbs
Totally Disabled
Active Duty Death
Basic Exemption
$40,000
Low Income Exemption
24,000 or $34,000)
$60,000
In practice, despite the apparent distinction made in existing law that the amount of the exemption
varies according to the type of disability, virtually all claimants meet the “totally disabled”
classification. To simplify this discussion, the remainder of the analysis will refer to either the
$100,000 basic exemption or the $150,000 low income exemption.
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Under the new law the exemption amounts and income threshold will be:
Disability Type
•
•
•
•
Blind
Lost Two or More
Limbs
Totally Disabled
Active Duty Death
Basic Exemption
$40,000*
Low Income Exemption
($40,000 + CPI)
$60,000*
(*This bill is double joined to SB 2195 (Soto), which permanently extended the
current exemption amounts of $100,000 and $150,000.)
In General:
Section 4(a) of Article XIII of the California Constitution grants the Legislature the
authority to exempt from property tax, in whole or in part, the home of a person (or
a person’s spouse) who is injured in military service. This exemption is commonly
referred to as the “disabled veterans’ exemption.” Injuries that qualify a veteran for
the exemption include: 1) total disability, 2) blindness or 3) lost use of two or more
limbs. The spouse of a disabled veteran is able to maintain the exemption after the
veteran’s death as long as the spouse is unmarried. Additionally, since 1994, the
unmarried spouse of a person who, as a result of a service-connected injury or
disease, dies while on active duty is able to qualify for the disabled veterans’
exemption.
Section 205.5 of the Revenue and Taxation Code implements the Legislature’s
authority to provide a property tax exemption for disabled veterans and/or their
unmarried surviving spouses. As noted in the table above, the amount of the
exemption depends upon 1) type of injury and 2) household income.
Comments:
1. Purpose. To increase the income threshold for the higher exemption amount
provided to low income persons qualifying for the disabled veterans’ exemption.
2. Key Amendments. The April 25 amendments, in effect, delete from SB 1362
amendments to Section 205.5 which would have made permanent the current
property tax exemption amounts scheduled to sunset on January 1, 2001 and
instead double joins this bill to SB 2195 (Soto), which makes identical provisions
with respect to making the exemption amounts permanent. (See SB 2195 analysis
for detail on this provision.)
3. The income threshold has not changed for over 16 years. The income threshold
for the low-income exemption is keyed to the threshold set for eligibility in
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Property Tax Postponement Program. This income threshold has not changed
since 1983.
4. This bill provides for annual automatic increases in the income threshold
level. This bill increases the income threshold to $40,000 for the year 2001. For
the 2002 calendar year and each year thereafter the income threshold for the
prior year would be adjusted by an inflation factor that is the percentage change
from October of the prior fiscal year to October of the current fiscal year, in the
California Consumer Price Index for all items as determined by the California
Department of Industrial Relations. This is the same measurement period that is
used for purposes of factoring base year values for purposes of Proposition 13
under Section 51 of the Revenue and Taxation Code, except that the actual
percentage change would be used (there is a 2% cap on the inflation factor for
base year values).
5. Disability Types. In practice, virtually all claimants qualify for the basic
exemption level of $100,000 or the low-income exemption level of $150,000. The
$40,000 and $60,000 levels are obsolete. Eliminating the varying amounts of the
exemption for disability type conforms the statute to existing practice with the
added benefit of streamlining this section of law and protecting disabled
veterans who could unknowingly claim the lower exemption amount.
6. Definition of Blindness. According to the California Department of Veterans’
Administration, the definition of “blind” in existing law is outdated. The March
15 amendment reflects the current definition used by the Veterans’
Administration. However, this provision was amended out by AB 2562.
Late Filings
Revenue and Taxation Code Section 276, 276.1
This bill 1) revises and recast the partial exemption provisions for late filings for
all claimants and 2) creates a separate statute for the specific case involving a
disability rating issued by the federal government with a retroactive effective
date.
Late Filings – Generally
This bill repeals the current provisions related to the amount of the exemption
granted to a disabled veteran who files a claim after the final filing date for a 100%
exemption, which is February 15. In effect, the new provisions permit a partial
exemption, at 85%, to be granted for prior tax years, subject to the limitations on
refunds, on property for which the exemption would have been available but for the
taxpayer’s failure to file a claim. Additionally, for a claim filed between February 16
and December 10, it increases the amount of the partial exemption from 80% to 90%.
The following table summarizes the late filing provisions under the new law.
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Amount of
Exemption
Filing
Reqs.
Basic
Exemption
$100,000
One
Time
Only
Low Income
Exemption
$150,000
Annual
Refiling
Claim
Filed By
2/15
$1,000
Claim Filed
Between
2/16 and 12/10
$900
(1000 x 90%)
Claim Filed
After
12/10
$850
(1,000 x 85%)
for current tax
year
Refund Prior
Tax Years
$1,500
$1,350
(1,500 x 90%)
$1,275 (1,500
x 85%) for
current tax
year
Yes, refund
up to four
prior tax
years @ $850
per year
Yes, refund
up to four
prior tax
years @
$1,275 per
year.
Late Filings - Delayed Disability Ratings
This bill permits the full amount of the disabled veterans’ exemption (rather than a
partial exemption as provided above) to be granted retroactively for property for
which the exemption would have been available but for the taxpayer’s failure to
receive a timely disability rating from the United States Department of Veterans
Affairs (USDVA). The exemption, subject to the limitations on refunds, would be
granted as of the effective date of the disability rating.
Exemption
Amount of
Exemption
Filing
Reqs.
Basic
Exemption
$100,000
One
Time
Only
Low Income
Exemption
$150,000
Annual
Refiling
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Filed By
2/15
$1,000
Claim Filed
Between
2/16 and 12/10
$1,000
$1,500
$1,500
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B
Claim Filed
After
12/10
$1,000
$1,500
U L L E T I N
Refund Prior
Tax Years
Yes, refund
up to four
prior tax
years @
$1,000 per
year
Yes, refund
up to four
prior tax
years @
$1,500 per
year.
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Law Prior To Amendment:
The disabled veterans’ exemption is generally available in two amounts14:
•
$100,000 for qualified persons, hereafter referred to as the “basic exemption”
which is provided on a one time filing basis, and
•
$150,000 for qualified persons with low incomes, as specified, hereafter referred
to as the “low income exemption” which requires a first time filing and
subsequent annual filings to reaffirm income eligibility.
With respect to property tax exemptions that require claims, Article XIII, Sec. 6 of the
California Constitution provides that the failure in any year to claim, in a manner
required by the laws in effect at the time the claim is required to be made, an
exemption which reduces a property tax shall be deemed a waiver of the exemption
for that year.
For both levels of disabled veterans’ exemption, first time filings for the basic
exemption and first time filings or annual re-filings for the low income exemption, a
claim must be filed between the lien date (January 1) and February 15 to receive the
full amount of the exemption on the upcoming tax bill for the ensuing fiscal year
(July 1 – June 30). If a claim is filed between February 16 and December 10, 80
percent of the exemption is available. If a claim is not made on or before December
10, which is the date the first installment of the property tax bill becomes delinquent,
then the exemption may not be applied to taxes owing for that fiscal year. For
annual re-filings of the $150,000 low income exemption, where a claim is not made
on or before December 10, the exemption would not be lost completely, but would
instead be reduced to the basic exemption level of $100,000.
The following table summarizes the filing provisions for the disabled veterans’
exemption under previous law.
Exemption
Amount of
Exemption
Basic
Exemption
$100,000
Low Income
Exemption
$150,000
Filing
Reqs.
One
Time
Only
Annual
Refiling
Claim
Filed By
2/15
$1,000
Claim Filed
Between
2/16 and 12/10
$800
(1000 x 80%)
$1,500
$1,200
(1,500 x 80%)
Claim Filed
After
12/10
$0 for
current tax
year
$0 for current
tax year
Refund Prior
Tax Years
No
No
In practice, despite the apparent distinction made in existing law that the amount of the exemption
varies according to the type of disability, virtually all claimants meet the “totally disabled”
classification. To simplify this discussion, the remainder of the analysis will refer to either the
$100,000 basic exemption or the $150,000 low income exemption.
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In General:
The following table summarizes the late filing provisions for various property tax
exemptions where a claim must be filed to receive the exemption.
Summary of Late Filing Provisions For Various Exemptions
Exemption
Amount of
Exemption
Filing
Due
Date
Basic Disabled
Veterans’
Low Income
Disabled Veterans’
$100,000
One Time
2/15
80%, if by 12/10
No
$150,000
Annual
2/15
80%, if by 12/10
No
Homeowners’
Veterans’
Welfare
Church
Cemetery
Exhibition
Veterans’
Organizations
Public Libraries
Free Museums
Schools,
Colleges,
Universities
$7,000
$4,000
Generally
100%,
sometimes
partial
exemption
provided
where part of
property is
eligible.
One Time
Annual
Annual
2/15
2/15
2/15
80%, if by 12/10
80%, if by 12/10
90%, if filed on or
before January 1 of
the next calendar
year.*
No
No
Yes
Religious
Generally
100%.
Late Filing
85%, if filed after
January 1 of the
next calendar year.*
One Time
*But not more than
$250 is to be
charged for those
years that taxes can
be canceled or
refunded.
Same as above.
2/15
Retroactive for
Prior Tax Years
If taxes were
paid; four years
of refunds.
If taxes were not
paid; taxes may
be canceled for
an unlimited
number of years.
Same as above.
Comments:
1. Purpose. To permit retroactive exemptions for prior tax years, which is
prohibited under existing law.
2. Key Amendments. The April 6 amendments reflect language suggested to the
author by the Board to 1) change the treatment of claims filed on December 10, 2)
modify language intended to alert taxpayers that refunds for prior years taxes
would be subject to the statute of limitations on refunds and thus a refund may
not be issued for every tax year the claimant may have otherwise been qualified,
and 3) delete provisions relating to granting the exemption less $250, a concept
taken from the late filing provisions for other exemptions found in Section 270,
which does not translate well because those exemptions generally exempt the
entire property (regardless of value) whereas the disabled veterans’ exemption is
for a set amount.
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3. Under current law, the disabled veterans’ exemption can not be granted for
any year unless a claim is filed on or before December 10 of that tax year. The
exemption is available on a prospective basis once a claim is filed. This bill
effectively permits the disabled veterans’ exemption to be retroactively granted,
as specified, for prior tax years. If taxes on the property were paid prior to
receiving the disability rating, the number of prior tax years for which the
exemption could be granted retroactively would be generally limited to four.
Revenue and Taxation Code Section 5096 provides that a claim for refund must
be filed within four years after making the payment. Thus, in practice, the
exemption may not always be granted for every year the claimant may have been
eligible. There is no statute of limitation placed on the cancellation of unpaid
taxes otherwise permitted by law. Consequently, if taxes were not paid in prior
years, there would be no limit to the number of years that may be canceled15.
Late Filing - Generally
1. This provision conforms, in essence, the late filing provisions for the disabled
veterans’ exemption to those provided for various non-profit agencies and
governmental properties. These provisions are similar to the late filing
provisions for the following exemptions: welfare, church, religious, public
schools, colleges, community colleges, state colleges, state universities, free
public libraries, exhibition, free museums, veterans’ organizations, and
cemeteries. (The current late-filing provisions for disabled veterans’ exemptions
are identical to those for the homeowners’ exemption and the veterans’
exemption.) The partial exemption amount would increase from 80% to 90% for
claims filed after February 15 but on or before December 10 and refunds for prior
years would be granted at 85% of the exemption amount.
2. This measure provides relief to those persons who were eligible for the
exemption, but were unaware of the program. Some homeowners, particularly
the unmarried surviving spouses of persons who died while on active duty, are
unaware that they are eligible for this exemption. The spouses of persons who
died in active duty were not eligible for the exemption until after a 1992
constitutional amendment (Proposition 160).
Late Filing – Disability Ratings
1. In practice, it can take many years for a veteran to receive a disability rating
from the USDVA, especially where the veteran has appealed their rating.
Some disabled veterans are uninformed of the exemption until after their
disability claim is approved by the USDVA and they receive educational material
on the benefits available to disabled veterans. For those aware of the exemption,
15
In practice, action would commence to sell tax-defaulted property after five years of non-payment.
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but awaiting their disability rating, some counties have adopted an
administrative practice where they accept the filing of a “protective claim” each
year. This administrative practice allows the county to grant the exemption once
the disability rating is received, since technically the claim for each tax year was
filed “timely”. But this remedy is only helpful for those persons who previously
have consulted with their local county assessor. Other counties may not accept
or suggest “protective” claims.
2. Other types of situations with “back dated” effective dates would fall under
the general provisions for “late filing” in proposed Section 276. For instance,
it is possible that a surviving spouse of a person who dies of a disease incurred in
active duty will receive a back dated effective date that the disease was “service
connected.”
3. As currently drafted, the filing provisions for back dated disability ratings
may be overly restrictive. For instance, in the worst case scenario, if a person
receives their rating in the mail on December 31, they would have until the next
day, January 1 (the lien date), to file a claim with the assessors office. To correct
this, the following amendments are suggested:
276.1 (b) The claimant subsequently files an appropriate claim for the
disabled veterans' exemption described in Section 205.5 on or before the
next following lien date.
4. Related Legislation. AB 2092 (Reyes) added Section 890.3 to the Military and
Veterans Code, which with respect to property taxes, permits the disabled
veterans’ exemption to be granted retroactively for property for which the
exemption would have been available but for the taxpayer’s failure to receive a
timely disability rating from the United States Department of Veterans Affairs
(USDVA).
Portability
Revenue and Taxation Code Section 276.2, 276.3
This provision allows a disabled veteran to receive the full amount of the
exemption in any year in which they move from one home to another.
Law Prior To Amendment:
Under current law, if a disabled veteran changes their principal place of residence
on or after the lien date (January 1), the exemption does not terminate on the first
home for the ensuing fiscal year (July 1 – June 30). The exemption is not allowed on
the new residence until a claim is filed on the new residence or before February 15 or
within 30 days of notice of supplemental assessment for the new residence,
whichever occurs first.
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In General:
There are two alternatives by which a disabled veterans’ exemption may be granted:
Alternative 1: The exemption is available to an eligible owner of a dwelling which is
occupied as the owner’s place of residence as of 12:01 a.m. January 1 each year. The
full exemption is available if a claim is filed on or before February 15, or
Alternative 2: The exemption is available to an eligible owner of a dwelling subject
to Supplemental Assessment(s) resulting from a change in ownership or new
construction on or after January 1 provided,
(a) The owner occupies or intends to occupy the property as his or her principal
place of residence with 90 days after the change in ownership or completion
of new construction and,
(b) The property is not already receiving the disabled veterans’ exemption or
another property tax exemption of greater value. If the property received an
exemption of a lesser value on the current roll (most often the case, the
property is receiving a $7,000 homeowners’ exemption), the difference in the
amount between the two exemptions shall be applied to the Supplemental
Assessment.
The full exemption (up to the amount of the supplemental assessment)16, if any, is
available if a claim is filed by the 30th day following the Notice of Supplemental
Assessment issued as a result of a change in ownership or completed new
construction. If a claim is filed after the 30th day following the Notice of
Supplemental Assessment, but on or before the date which the first installment of
the supplemental tax bill becomes delinquent, 80 percent of the available exemption
may be allowed.
An exemption under Alternative 2 will apply to the Supplemental Assessment(s), if
any, and the full exemption will be allowed for the following fiscal year(s).
Comments:
1. Purpose. To ensure that a person qualified for the disabled veterans’ exemption
can immediately receive the full amount of exemption on the new residence.
2. This measure ensures that a person who qualifies for the disabled veterans’
exemption may immediately transfer the exemption from one home to another.
Under current law, it is possible that a person who purchases a home previously
owned by a person who was receiving the disabled veterans’ exemption will
enjoy the property tax exemption for the remainder of the tax year, whereas the
disabled veteran is unable to obtain the full amount of the exemption on their
16
For example, although the person would be entitled to a $100,000 exemption, the supplemental
assessment may be for an amount less than $100,000.
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new residence the first year of its purchase.
possibility.
This measure corrects this
3. This measure provides that in the event that property receiving a disabled
veterans' exemption as described in Section 205.5 is sold or otherwise
transferred to a person who is not eligible for that exemption, the exemption
shall cease to apply on the date of that sale or transfer. Thus the new owner will
no longer benefit from the disabled veterans exemption.
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Senate Bill 1417 (Wright) Chapter 417
Proposition 60/90/110 Base Year Value Transfers
Rescissions
Intercounty Ordinances – Effective Date
Effective January 1, 2001. Amends Section 69.5 of the Revenue and Taxation Code.
This measure 1) requires the assessor, upon a taxpayer’s request, to rescind the
once in a lifetime base year value transfer for a person over the age of 55 years if
the home was vacated within 90 days after the claim is filed, and 2) permits
intercounty base year value transfers to be granted prospectively in counties that
change the effective date of their ordinance where the period for filing a timely
claim would have otherwise expired.
Sponsor: Senator Cathie Wright
Rescissions
Revenue and Taxation Code Section 276.2, 276.3
This bill amends Section 69.5 of the Revenue and Taxation Code to require,
notwithstanding any other provision of law, the assessor to grant a property
owner’s request to rescind a base year value transfer in the case where the new
home was vacated as the claimant’s principal place of residence within 90 days
after the date the original claim for a base year value transfer was filed. The
request to rescind the transfer must be made within six years after the transfer
was granted.
Law Prior To Amendment:
Pursuant to Propositions 60, 90, and 110, persons who are over the age of 55 years
or who are severely and permanently disabled are permitted to transfer, once in a
lifetime, their Proposition 13 base year value from one home to another of equal or
lesser value. Existing law provides that, in certain instances, a claimant may rescind
their previously filed claim for a base year value transfer. To qualify for a rescission,
the request must be made before property taxes on the new home are delinquent, or
before any property tax refund is issued. The assessor may levy a fee to cover the
costs of processing the base year value transfer rescission.
In General:
California's system of property taxation under Article XIIIA of the State Constitution
(Proposition 13) values property at its 1975 fair market value, with annual increases
limited to the amount of inflation or 2%, whichever is less, until the property
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changes ownership or is newly constructed. At the time of the ownership change or
new construction, the value of the property for property tax purposes is
redetermined based on current market value. The value initially established, or
redetermined where appropriate, is referred to as the "base year value." Thereafter,
the base year value is subject to annual increases for inflation. This value is referred
to as the "factored base year value."
Proposition 60 (1986) amended the constitution to authorize the Legislature to
provide an exception to the general requirement that property be reassessed to
current market value by providing for a one-time transfer of base year value from a
former principal place of residence to a replacement dwelling, under certain
conditions, by qualified persons who are over the age of 55 years. Proposition 90
(1988) further amended the constitution to authorize such base year value transfers
to replacement dwellings located in another county, provided the county board of
supervisors of that county adopts an ordinance accepting such transfers.
Proposition 110 (1990) extended these base year value provisions to persons who are
severely and permanently disabled.
Revenue and Taxation Code Section 69.5 provides generally that any person over the
age of 55 years, or any person who is severely and permanently disabled, may
qualify for relief from provisions of law that would otherwise require a
reassessment of a newly acquired residence to current market value. Section 69.5
provides such relief by allowing an eligible claimant to transfer, one time only, the
existing base year value of a sold residence to the new residence as long as both
residences are located in the same county and the new residence is of equal or lesser
value. The law permits that a claimant may transfer their base year value to a newly
acquired residence that is located in another county, but only if the county board of
supervisors of the receiving county has adopted an ordinance accepting such base
year value transfers. Currently, only 10 of the 58 counties have opted to grant this
property tax benefit: Alameda, Kern, Los Angeles, Modoc, Monterey, Orange, San
Diego, San Mateo, Santa Clara, and Ventura. In the past, four other counties have
had ordinances which are no longer in effect: Contra Costa (repealed 11-8-93), Inyo
(repealed 10-13-94), Riverside (repealed 7-1-95), and Marin (repealed 1-16-97).
Comments:
1. Purpose. To address a specific case in which a property owner has been unable
to obtain a rescission of their base year value transfer after they discovered the
climate of the location of their replacement home in Riverside County was not
suitable for them. Apparently the property owner would have been eligible to
rescind their base year value transfer under existing law if they had been aware
of the ability to do so. However, due to a miscommunication with the Riverside
County Assessor’s Office, they were left with the impression that a rescission
was not possible. The property owner subsequently purchased a home in
Ventura County and filed for a base year value transfer. This claim was denied
because the property owners had previously received a base year value transfer
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on their Riverside County home. The property owners appealed this ruling and
the Ventura County Assessment Appeals Board has held open their appeal while
a legislative solution, which is contained in this measure, is attempted to permit
the property owner to rescind the prior base year value transfer.
2. Key Amendments. The April 10 amendment provides that the rescission request
must be made within six years after the transfer was granted to provide a specific
time period after which a rescission would not be permitted. This amendment
was made to address a concern raised by Riverside County that the provisions
permitting a rescission under this bill (where a person vacates the home 90 days
after the original claim was filed) were open ended so that regardless of the
number of years that had elapsed after the base year value transfer had been
granted, the taxpayer’s rescission request would be granted. With this
amendment, a rescission request made after the six year time frame would not be
permitted. (In the specific case at hand, the transfer was granted in March of 1993
and a written request to rescind the transfer was made in July of 1998.)
3. Current law permits a homeowner to rescind their base year value transfer
after the assessor has processed the transfer request but before the date a tax
refund is issued or a tax bill becomes delinquent, as the case may be. These
provisions were added to the law for the specific purpose of clarifying in statute
that rescissions were permissible after the issue was raised several times by
inquiring assessors and taxpayers. The principle of permitting rescissions is that
taxpayers should not be forced to retain a tax benefit when they are willing to
repay the tax savings they received.
4. The base-year value transfer provision is a once in a lifetime benefit. The long
term property tax savings from this benefit can be significant. Some persons
have used their one-time benefit on a home which they expected to be their
permanent home for their retirement years, but then discovered that home or
location was not suitable for a variety of reasons: their health, family needs, or
climate.
5. These provisions make it possible for the property owner in this specific
instance to rescind their claim and pay back the property tax savings plus
interest to the county. Where an inter-county transfer is involved, as in this
instance, the rescinding county (Riverside County) will ultimately receive more
property tax revenue. For instance, if the home was assessed at $100,000 as a
result of a base year value transfer, rather than its fair market value of $300,000,
then once the recission is granted, the taxpayer would receive a tax bill via an
escape assessment based on an additional $200,000 of assessed value per tax
year. In addition, this measure provides that interest be added to the escape
assessment. The result is a revenue benefit for the rescinding county.
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6. This provision also permits the rescinding county to charge a fee to cover all
reasonable costs of processing the rescission request. Thus, the rescinding
county need not incur any unfunded administrative costs.
Intercounty Ordinance – Effective Date
Revenue and Taxation Code Section 69.5
This provision adds subdivision (k) to Section 69.5 to provide that if a county
adopts an ordinance with an effective date that is more than three years prior to
the actual date the ordinance is adopted, that those persons who would have been
eligible to receive a base year value transfer, except that an ordinance had not
been in effect at the time they purchased their home and who would otherwise be
precluded from filing a “timely” claim because the three year period to file a
claim had elapsed, could file and receive a base year value transfer on a
prospective basis. A base year value transfer that is granted under this provision
would not result in a refund or cancellation of property taxes previously paid.
Thus, the base year value transfer would be granted prospectively.
Sponsor: Ventura County Assessor
Law Prior To Amendment:
Existing law provides that a claimant may transfer their base year value to a newly
acquired residence that is located in another county, but only if the county board of
supervisors of the receiving county has adopted an ordinance accepting such base
year value transfers. Section 69.5(a)(2)(E) provides that a county may specify an
effective date that is earlier than the actual date the ordinance is adopted, but no
earlier than November 9, 1988 (the effective date of Proposition 90).
Section 69.5(e)(B)(5) requires, in part, that to receive a base year value, a person must
file a claim within three years of the date the replacement home is purchased or
constructed.
Comment:
Purpose. Ventura County adopted an intercounty base year value transfer
ordinance on May 4, 1992. The county would like to amend their ordinance to
specify an effective date that coincides with the effective date of Proposition 90, so
that persons who purchased a replacement home between November 9, 1988 and
May 4, 1992, and previously ineligible to receive a base year value transfer, can
receive this property tax benefit on a prospective basis. While Ventura County may
amend the effective date of their ordinance under current law, it would have no
practical effect since a claim must be filed within three years of the date the
replacement property is purchased. To remedy this situation, this measure would
allow a three year filing period that commences on the new date the ordinance is
adopted.
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Senate Bill 1844 (Kelley) Chapter 613
Mandatory Audit Threshold
Effective January 1, 2001. Amends Section 469 of the Revenue and Taxation Code.
This bill increases the assessable trade fixture and business personal property
owned threshold level for mandatory audits from $300,000 to $400,000.
Sponsor: San Diego Board of Supervisors
Law Prior To Amendment:
The law requires that county assessors audit at least once every four years the books
and records of any taxpayer that is engaged in a profession, trade, or business if the
taxpayer has assessable trade fixtures and business tangible personal property
valued at $300,000 or more. These statutorily required audits are commonly
referred to as “mandatory audits.”
In General:
Audit Objective
A property tax audit is a means of collecting data relevant to the determination of
taxability, situs, and value of property. It is used to verify an assessee's reported
cost and other information which may influence the assessment of all items that are
taxable under property tax law. An audit program is a system used to select and
conduct these audits. Both are used to sample property tax assessments to ensure
that taxable property and related information have been accurately reported by the
assessee and have been properly assessed by the assessor.
The primary objective of the property tax audit is to determine that a correct
assessment has been made. The auditor applies generally accepted auditing
standards and utilizes generally accepted accounting and appraisal principles in
performing these audits. Audits, and the audit program as a whole, help to identify
problems, correct inaccurate existing assessments, and increase the likelihood that
future assessments will be accurate through improved reporting by the assessee and
improved understanding of the property by the assessor's office.
Audit Selection
An important part of the audit program is the selection of accounts to be audited.
As previously discussed, some audits are required by law (mandatory) while
additional audits (commonly referred to as nonmandatory) can be selected by the
assessor as a means of sampling the system as a whole.
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Mandatory Audits. As required by Section 469 and Property Tax Rules 192 and 193,
for assessees owning, controlling, or possessing tangible business personal property
and fixtures with a full cash value of $300,000 or more, audits must be completed at
least once in each four-year period. However, an in-depth audit is not always
required for each year in the four-year period. The auditor may "sample" one year in
the four-year audit period. If no material discrepancy or irregularity is found, there
is no requirement to audit the remaining years. If a discrepancy is found, the
auditor must continue and audit the remaining years unless (1) the discrepancy or
irregularity in the "sample" year is peculiar to that year and (2) the discrepancy or
irregularity did not result in an escape.
Nonmandatory Audits. Nonmandatory audits are audits not required by law, but
are authorized by Revenue and Taxation Code Section 470 and Property Tax Rule
192(e). The Board recommends that these types of audits should be done in addition
to mandatory audits since an audit program would not be complete unless it
includes a representative sample from all sizes and types of property.
Nonmandatory audits are selected at the discretion of the assessor.
Depending on the resources available, it may be difficult for county assessors to
complete a large number of nonmandatory audits. Counties may develop criteria for
selecting these audits rather than making a random selection. Examples of criteria
appropriate for selection may include: identified discrepancies; accounts just below
the mandatory audit cut-off; inconsistent, incomplete, or nonfiled property
statements; taxpayer's request for audit; and/or selection by type of business.
Background:
The requirement that assessors perform mandatory audits of taxpayers books and
records was established in 1966. Initially the threshold level was set at $50,000. The
level was increased to $100,000 in 1976, to $200,000 in 1979, and to its present level of
$300,000 in 1991.
Comments:
1. Purpose. According to the sponsors, the county’s current audit staff is totally
engaged in fulfilling the mandatory audit requirements. By raising the audit
threshold, the workload for mandatory audits would be reduced, giving the
county assessor more flexibility in the use of limited resources and make staff
available to audit a number of smaller businesses which have never been
audited.
2. Key Amendments. The June 12 amendment reduced the audit threshold from
$500,000 to $400,000. The California Assessors’ Association had requested that
the threshold be reduced to $400,000, and the Board of Equalization supported
the Association’s request.
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3. Nonmandatory audits may yield more revenue producing audits. Most
taxpayers who are subject to mandatory audits are routinely audited. Thus,
these taxpayers generally have a higher level of compliance with property tax
law since prior audits have increased knowledge of property tax law.
Consequently, an auditor may yield more revenue per hour on nonmandatory
audits.
4. Some counties may treat this change in law as a workload reduction rather
than a workload redirection. Though a redirection of existing resources into
non-mandatory audits may yield more productive audits with respect to
generating additional revenue, it is possible that this may not be the result of this
bill. If the increase in the threshold is interpreted by some counties as an
opportunity to reduce workload, assessors’ resources in this area could be
reduced. Cuts in assessors’ audit staff, where the staff already has difficulty in
completing their mandatory audit workload, may prevent any staff from being
redirected to nonmandatory audits.
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Senate Bill 1933 (Vasconcellos) Chapter 619
California Commission on Tax Policy in the New Economy
Effective January 1, 2001. Adds and repeals Part 18.3 (commencing with Section 38061) of
Division 2 of the Revenue and Taxation Code.
This measure makes various findings and declarations regarding the rapidly
changing technology and its impact on California’s economy, and states “There is
a need to reevaluate our entire system of tax policies and collection mechanisms
in light of the new economy.” This measure creates the California Commission
on Tax Policy in the New Economy comprised of nine voting members, five
appointed by the Governor, two appointed by the President pro Tempore, and
two appointed by the Speaker of the Assembly. In addition, ex officio members
of the Commission include the chair of the BOE, the executive officer of the
Franchise Tax Board the Director of Employment Development, the chair of the
California Public Utilities Commission, the Director of Finance, the Controller, a
public member of the California Economic Strategy Panel, and the chairs of both
the Senate and Assembly Revenue and Taxation Committees.
The Commission is charged with conducting public hearings to address Internet
taxation, and study and make recommendations regarding specified elements of
the California system of state and local taxes, including, but not limited to, the
sales and use tax, telecommunications taxes, income taxes, and property taxes.
With respect to the property tax, this bill requires the Commission to (1)
investigate the revenue repercussions for local government in assessment of real
property, assuming changes in the trends of real property versus personal
property utilization, (2) examine the effects of electronic commerce activity on
land-based enterprises in the new economy, and (3) evaluate the impact on local
economic development approaches and consider what new tools could be used.
The commission must submit an interim report to the Governor and the
Legislature at least 12 months from its first public meeting, and a final report with
recommendations at least 24 months from its first public meeting.
This bill will be repealed on January 1, 2004.
Sponsor: Senator John Vasconcellos
Law Prior To Amendment:
Under current law, the California Internet Tax Freedom Act (Chapter 351 of 1998)
specifies that the state may not impose or attempt to collect any tax on Internet
access for three years beginning January 1, 1999. However, any existing tax,
including any sales and use tax that is imposed in a uniform and nondiscriminatory
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manner, as specified may be imposed. This means that state and local governments
may impose sales and use taxes on all Internet sales, provided that the tax and its
rate are the same as that which would be imposed on transactions conducted in a
more traditional manner, such as over the phone or through mail order. Sales and
Use Tax Law requires persons to pay use tax, as measured by the purchase price of
the property, to the Board of Equalization (BOE) on purchases of tangible personal
property for use in this state from out-of-state retailers. Persons who purchase items
for use in this state from out-of-state retailers who are engaged in business in California
pay use tax to the retailer, who must remit the use tax to the BOE.
Under current federal law, a three-year moratorium was also imposed on new
Internet access taxes or other levies on electronic commerce, and expires in October
2001. That legislation also created the Advisory Commission on Electronic
Commerce (ACEC) to study federal, state, local, and international taxation and
tariffs on transactions using the Internet and Internet access. The ACEC’s 19
members include three governors, heads of several major information technology
corporations, and other government and business leaders from across the nation,
including Board of Equalization Chair Dean Andal. The Commission issued a
report to Congress on April 3, 2000.
Comments:
1. Purpose. To address the collection and administration of taxes in the 21st century
technology-dependent economy.
2. The ACEC was created by Congress to study this issue. The ACEC obtained at
least majority approval on the following concepts: (1) Extend the current
moratorium on multiple and discriminatory taxation of electronic commerce for
an additional five years, through 2006. (2) Prohibit taxation of digitized goods
and their non-digitized counterparts to protect consumer privacy on the Internet
and prevent the taxation of all services, entertainment, and information in the
U.S. economy (both on the Internet and on Main Streets across America). (3)
Make permanent the current moratorium on Internet access taxes, including
those access taxes grandfathered under the Internet Tax Freedom Act. (4)
Establish “bright line” nexus standards for American businesses engaged in
interstate commerce, since the cyber economy has blurred the application of
many nexus rules, and American businesses need clear and uniform tax rules
and definitions before being exposed to business activity and sales and use tax
collection obligations. (5) Encourage state and local governments to work with
the National Conference of Commissioners on Uniform State Laws to simplify
their own telecommunications and sales tax systems to ease burdens on
interstate commerce. (6) Respect and protect consumer privacy in crafting any
laws pertaining to online commerce generally and in imposing any tax collection
and administration burdens on the Internet specifically. Their final report is
available on-line at http://www.ecommercecommission.org./report.htm.
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3. Other organizations have already been formed to address tax administration in
the new economy. In addition to the ACEC, the Multistate Tax Commission
(MTC), of which the BOE is a member, developed the Sales Tax Simplification
Project to address sales tax simplification for all sales tax states. The minutes
from these conferences are posted on the MTC website (http://www.mtc.gov).
The Organization for Economic Cooperation and Development (OECD), which is
comprised of the United States and 28 other countries, is actively addressing
taxation issues related to e-commerce from an international perspective
(http://www.oecd.org). The National Tax Association (NTA), an association of
government officials, tax practitioners, business representatives, and
academicians includes a Communications and Electronic Commerce Tax Project
that issued its final report in September 1999 (http://www.ntanet.org). The
Electronic Commerce Advisory Council (ECAC), which was created by Governor
Pete Wilson by Executive Order W-175-98, released a report in November 1998
(http://www.e-commerce.ca.gov). And the Legislative Analysts Office issued
its report, California Tax Policy and the Internet, in January 2000
(http://www.lao.ca.gov). In addition, many other states and organizations have
become involved in Internet tax policy and numerous reports, with varying
conclusions and recommendations, have been published on the topic.
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Senate Bill 2084 (Polanco) Chapter 861
Commercial Trailers and Semitrailers
Effective September 29, 2000. Amends Section 13340 of, and adds Sections 29145 and 43402
to, the Government Code, amends Sections 10752, 10753.1, 10753.2, and 10753.9 of, and
adds Sections 225 and 11006 to, the Revenue and Taxation Code, and amends Sections 260,
4000, 4004, 4150.1, 4458, 5000, 5011, 5014, 5015, 5016, 5017, 5101, 5103, 5106, 5108,
5204, 5301, 5302, 5305, 5902, 6275, 6285, 6291, 6293, 6367, 8000, 8054, 9250.7, 9250.8,
9250.10, 9250.13, 9250.14, 9250.19, 9260, 9261, 9400, 9406, 9408, 36010, and 36109 of,
and adds Sections 288, 289, 468, 4000.6, 5014.1, 9400.1, 9406.1, 9554.2, 27910, and
42030.1 to, and repeals Sections 6851 and 6851.5 of, and amends and renumbers Section 390
of, the Vehicle Code.
This bill enacts the Commercial Vehicle Registration Act of 2001 to replace the
current registration system (fees based on unladen weights and vehicle license
fees) for commercial trailers with a permanent trailer plate identification
program. This bill provides that a “commercial trailer or semitrailer that has a
valid identification plate issued to it pursuant to Section 5014.1 of the Vehicle
Code is exempt from personal property taxation.” This language ensures that
commercial trailers or semitrailers do not become subject to taxation under
property tax law once they are no longer subject to the vehicle license fee.
Sponsor: Department of Motor Vehicles
Law Prior To Amendment:
Vehicles are not subject to property tax because the vehicle license fee, which is
administered by the DMV, preempts their taxation. Revenue and Taxation Code
Section 10758 provides that the vehicle license fee is in lieu of any other tax that is
based on value and is levied for state or local purposes.
Comment:
Purpose. To allow California to conform to federal law regarding membership in the
International Registration Plan Agreement for the purpose of collecting registration
fees for commercial trucks that operate on an interstate basis.
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Senate Bill 2170 (Committee on Revenue and Taxation) Chapter 647
Property Tax Omnibus Bill
Removed Property.
Statute of Limitations – Escape Assessments
Supplemental Assessments - Exemptions
Documented Vessels
State Lands Commission
State Assessee Appeals - Filing Dates
Private Contractors
This bill contains Board of Equalization sponsored provisions to:
1. Restore time limitation on escape assessments that may be levied for prior tax
years on an unreported change in ownership, except in cases of fraud or
changes in ownership involving property owned by a legal entity. (§§75.11
and 532).
2. Restore language that was inadvertently deleted by SB 2237 (Stats. 1998, Chap.
591) related to permitting a partial exemption to be granted on late filed claims
for the veterans', homeowners', and disabled veterans' exemptions on a
supplemental assessment. (§75.21)
3. Simplify the petition filing deadlines for appeals of assessments and
allocations of state-assessed properties. (§§731, 732, 733, 746, 748, 749, 758, and
759)
4. Establish safeguards to ensure the confidentiality of taxpayer confidential
information when consultants are hired by county assessors to perform
appraisal work. (§674)
It also contains, non- Board sponsored provisions to
5. Clarify that the time for filing property assessment appeals is "within 60 days
of the date of mailing printed on the notice or the postmark date therefor,
whichever is later." §75.31 (State Bar - Taxation Section)
6. Add the State Lands Commission to the list of agencies who may receive
appraisal data in possession of the assessor. §408 (State Lands Commission)
7. Clarify that for property damaged by disaster, misfortune or calamity, the new
base year value excludes the portion of the previous value attributable to the
portion of the property that is destroyed or removed. §51 (Assessors'
Association)
8. Strike out obsolete language relating to taxation of documented vessels. §227
(Assessors' Association)
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Statute of Limitations
Escape Assessments and Supplemental Assessments
Revenue and Taxation Code Sections 75.11 and 532
This bill reinstates the prior limitation on the number of prior tax years for which
escape assessments can be issued except in two instances where property has
been underassessed or escaped assessment, following a change in ownership.
1. The first is where the penalty provided for in Section 503 must be added to the
escape assessment. (Section 503 provides that if any taxpayer or the taxpayer's
agent through a fraudulent act or omission causes, or if any fraudulent
collusion between the taxpayer or the taxpayer's agent and the assessor or any
of the assessor's deputies causes, any taxable tangible property to escape
assessment in whole or in part, or to be underassessed, the assessor shall
assess the property in the lawful amount and add a penalty of 75 percent of the
additional assessed value so assessed.)
2. The second is where a change in ownership statement, is not filed pursuant to
Section 480.1 where there is a change in control of a legal entity under Section
64(c)17 or pursuant to Section 480.2 where there is a change in ownership of a
legal entity under Section 64(d).18
17 Section 64(c) states “(c) (1) When a corporation, partnership, limited liability company, other
legal entity, or any other person obtains control through direct or indirect ownership or control of
more than 50 percent of the voting stock of any corporation, or obtains a majority ownership
interest in any partnership, limited liability company, or other legal entity through the purchase
or transfer of corporate stock, partnership, or limited liability company interest, or ownership
interests in other legal entities, including any purchase or transfer of 50 percent or less of the
ownership interest through which control or a majority ownership interest is obtained, the
purchase or transfer of that stock or other interest shall be a change of ownership of the real
property owned by the corporation, partnership, limited liability company, or other legal entity in
which the controlling interest is obtained.
(2) On or after January 1, 1996, when an owner of a majority ownership interest in any partnership
obtains all of the remaining ownership interests in that partnership or otherwise becomes the sole
partner, the purchase or transfer of the minority interests, subject to the appropriate application of
the step-transaction doctrine, shall not be a change in ownership of the real property owned by the
partnership.”
Section 64(d) provides that “If property is transferred on or after March 1, 1975, to a legal entity
in a transaction excluded from change in ownership by paragraph (2) of subdivision (a) of Section
62, then the persons holding ownership interests in that legal entity immediately after the transfer
shall be considered the "original coowners." Whenever shares or other ownership interests
representing cumulatively more than 50 percent of the total interests in the entity are transferred
by any of the original coowners in one or more transactions, a change in ownership of that real
property owned by the legal entity shall have occurred, and the property that was previously
excluded from change in ownership under the provisions of paragraph (2) of subdivision (a) of
Section 62 shall be reappraised.
The date of reappraisal shall be the date of the transfer of the ownership interest representing
individually or cumulatively more than 50 percent of the interests in the entity.
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These two exceptions serve to keep the substantive intent of 1995 legislation
concerning the unlimited escape assessment of certain properties that are not
reappraised to current market level following a change in ownership.
Law Prior To Amendment:
Under current law, the statute of limitations on levying escape assessments on a
change in ownership does not commence until a “change in ownership statement”
(COS) or “preliminary change in ownership report” (PCOR) is filed. Consequently,
if a taxpayer (the transferee) does not file a COS or PCOR, there is no limit on the
number of prior tax years subject to collection for back taxes via an “escape
assessment.”
Upon discovery of an unreported change in ownership, escape
assessments are issued for each year after the change in ownership occurred.
Background:
Prior to January 1, 1996, the maximum number of years that escape assessments on
an unreported change in ownership could ever be levied for previous tax years was
eight. This eight year period was limited to instances in which a change in
ownership had occurred but either a change in ownership statement (COS) or a
preliminary change in ownership report (PCOR) had not been filed.
Chapter 544 of the Statutes of 1995 (Senate Bill 1726, Kopp) revised the escape
assessment provisions to essentially require that an escape assessment be levied for
every year that property is underassessed whenever a change in ownership is not
reported. Specifically, SB 1726 deleted the former reference to an eight year time
period found in Revenue and Taxation Code Section 531.2 and instead substantively
recast the provisions in Revenue and Taxation Code Section 532 to provide that the
statute of limitations on levying escapes does not commence until a COS is filed.
Consequently, if a COS is not filed, then there is no limit on the number of years
subject to the collection of back taxes. Because of the manner in which the legislation
was drafted, the change in law permitting unlimited escape assessments is
retroactive as well as prospective. Under the recast provisions, any taxpayer who
did not file a COS or PCOR is at risk of receiving tax bills for up to 17 years of back
taxes (for a change in ownership occurring on or after March 1, 1975, which resulted
in an increase in value for the 1982-83 fiscal year) whether or not they filed a
document evidencing a change in ownership with the county recorder.
Furthermore, absent legislative change, in future years the potential number of years
subject to back taxes will be unlimited.
Under current law, regardless of the number of years that back taxes are billed,
taxpayers will have, at most, only a four year period in which to pay them under an
A transfer of shares or other ownership interests that results in a change in control of a
corporation, partnership, limited liability company, or any other legal entity is subject to
reappraisal as provided in subdivision (c) rather than this subdivision.”
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installment payment plan. As assessors have begun to implement SB 1726, those
taxpayers affected have contacted legislative staff members to request relief.
Assessors have reported instances of being required to levy property taxes for up to
15 years of back taxes.
SB 1726 was introduced because of alleged fraudulent activity to thwart the
reassessment of a major high-rise property in downtown San Francisco to current
market level. This transaction was complex, involved transfers among legal entities,
appears to have been structured to avoid reassessment, and apparently involved an
agreement among some of the participants not to inform the assessor of the
transaction. The decision to not file a COS or PCOR was one of many elements in
this transaction.
Comment:
Purpose. To restore the maximum number of years that back taxes in the form of
escape assessment resulting from an unreported change in ownership may be
collected to eight for property owned by individuals (required to file under Section
480). Escape assessments would remain unlimited in instances where fraud was
involved or where a legal entity change in ownership under Section 64(c) or 64(d)
occurred and a change in ownership statement was not filed under Section 480.1 or
480.2.
Welfare Exemption Supplemental Assessments
Revenue and Taxation Code Section 75.21
This bill restores language unintentionally deleted by amendments made last
year by SB 2237. In addition, it recasts the original intent of SB 2237 by adding
subdivision (f) to Section 75.21 to provide that no additional exemption claim
shall be required to be filed until the next succeeding lien date in the case in
which a supplemental assessment results from a change in ownership of property
where the purchaser of the property owns and uses or uses, as the case may be,
other property that has been granted the college, cemetery, church, religious,
exhibition, veterans' organization, free public libraries, free museums, or welfare
exemption on either the current roll or the roll being prepared and the property
purchased is put to the same use. These amendments also specify that: 1) if the
non-profit organization does not file a timely application for exemption on the
next succeeding lien date then the provisions of paragraph (1) of subdivision (c),
which permit a partial exemption for late-filed exemptions, will apply and 2) in
all other instances when a supplement assessment results from a change in
ownership, then a claim would be required to be filed pursuant to subdivision (c)
of Section 75.21 to receive an exemption on the supplemental assessment (for
example, a non-profit organization which purchases property eligible for a
property tax exemption for the first time). These amendments are necessary
because SB 2237 did not address the situation where an entity does not file an
exemption on the next succeeding lien date and did not give entities the benefit of
a partial exemption when a late filing is made as prior law had permitted.
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Law Prior To Amendment:
In 1998, the Board of Equalization and the Assessors’ Association jointly sponsored a
provision contained in SB 2237 (Ch. 591, Senate Committee on Revenue and
Taxation) to eliminate the need for non-profit organizations to claim a property
exemption on a supplemental assessment resulting from a change in ownership.
Since most non-profit organizations must reclaim their property tax exemption
annually, in many cases it is burdensome to require them to file again mid-year to
extend a property tax exemption to property newly acquired during the year.
Instead, such organizations would file for an exemption on their supplemental
assessment when they otherwise filed for an exemption on “next lien date” when
they applied for their annual exemption. The amendments made by SB 2237
inadvertently deleted language related to the veterans', homeowners', and disabled
veterans' exemptions, which the bill was not intended to affect. Assessors’ offices
have contacted the Board concerning the administrative difficulties that the deletion
of this language has created and have noted the need for legislative cleanup.
Background:
Prior to SB 2237, the law provided similar streamlined filing in the case where a
supplemental assessment results from the completion of new construction on
property that had previously been granted exemption. In this situation, an
exemption claim did not have to be filed until the next succeeding lien date. The
new construction exception provision was sponsored by the Board of Equalization
in 1994 (SB 1431, Ch. 1222, Senate Committee on Revenue and Taxation) to (1)
eliminate the unnecessary burden placed on organizations to file an exemption claim
every time they made an improvement to their properties and (2) eliminate the
unnecessary administrative duties for assessors in processing these claims.
Comment:
Purpose. To restore the language unintentionally deleted. In addition, it would
recast the original intent of SB 2237.
State Assessee Appeals
Revenue and Taxation Code Sections 731, 732, 733, 746, 748, 749, 758 and 759
Assessed Value Appeals
With respect to appeals of the assessed value of state-assessed property, this bill:
• Eliminates the filing of declarations of intent to petition for reassessment on
both unitary and nonunitary property.
• Replaces the 20-day deadline for filing declarations of intent and the 30-day
deadline for filing petitions for reassessment with statutory petition filing
dates of July 20 for unitary assessments and September 20 for nonunitary
assessments, and with a single 50-day deadline for escape assessments.
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Requires mailing of notice of nonunitary value by the last day of July, rather
than the last day of June.
Allocation Appeals
With respect to appeals of the allocation of assessed value, this bill:
• Requires the Board to mail the allocated assessed values of an assessee’s
unitary property not later than June 15, rather than “upon or prior to the
completion of the assessment roll” (July 31).
• Replaces the 5-day deadline for filing petitions for correction of an allocated
assessment with a statutory petition filing date of July 20.
• Increases the time of notice of hearing on petitions for correction of an
allocated assessment from five days to ten working days.
• Requires that petitions for correction of an allocated assessment be
determined by December 31, rather than by July 31.
Law Prior To Amendment:
Assessed Value Appeals
Each year the Board of Equalization determines the fair market value of each state
assessees’ property. The Board then sends a notice to each state assessee indicating
the value set by the Board. Under current law, if a state assessee wishes to appeal
the value, they may either
1) file a “declaration of intent to petition for reassessment” within 20 days of
receiving the value notice and then file the actual “petition for reassessment” 30
days after the date of filing the declaration of intent, or
2) if a declaration of intent to petition the Board for reassessment is not filed, then
file a petition for reassessment within 20 days of receiving the value notice.
Allocation Appeals
After the Board of Equalization determines the fair market value of each state
assessees’ unitary property, the Board must then allocate the unitary value
determined among the various counties in California where the state assessee owns
property. The local county auditor applies the countywide tax rate area to the
county’s share of the total value of the state assessees’ unitary property to determine
the amount of taxes owed. The county auditor then uses statutory formulas to
allocate the taxes collected to the numerous local agencies located in the county.
Under current law, a state assessee may appeal the Board’s allocation of unitary
value to each county.
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Comments:
1. Purpose. To simplify the petition filing deadlines for appeals of assessments and
allocations of state-assessed properties, and conform the law to current Board
assessment and notice practices.
2. Unlike the appeals filing period for local assessees, that is consistent from year
to year for all property owners (i.e. July 2 through September 15), the filing
deadline for state assessees varies. The date depends upon (1) the date the
Board mails the value notice and (2) whether the state assessee first files a
declaration of intent. This bill simplifies the filing dates by establishing dates
certain that do not change every year, eliminating a confusing two-part
calculation to establish the filing deadline, and also eliminating potential
confusion or dispute over precisely when a filing period calculation commences.
3. Detailed Summary of Changes.
•
This bill conforms the filing dates for petitions for reassessment of unitary
properties and petitions for correction of allocated assessments with respect to
that unitary assessment.
•
This bill eliminates the need to file a “declaration of intent to petition for
reassessment” and instead simply require that, with respect to unitary property,
a petition for reassessment be filed by July 20, and with respect to nonunitary
property, a petition for reassessment be filed by September 20. The July 20 date
generally corresponds with the typical filing deadline for petitions for
reassessment of unitary property under current law when a declaration of intent
is filed, (20 days + 30 days). Similarly, the September 20 date for petitions for
reassessment of nonunitary property generally corresponds with the typical
filing deadline for those assessments.
•
This bill creates a filing deadline that is date certain each year and thereby
eliminates potential confusion and dispute over filing deadlines.
•
This bill requires the Board to mail the allocated assessed values of an assessee’s
unitary property not later than June 15, rather than “upon or prior to the
completion of the assessment roll” (July 31) as current law provides. It would
also replace the current 5-day deadline for filing petitions for correction of an
allocated assessment with a statutory petition filing date of July 20. This would
make the filing dates for “petitions for correction of allocated assessments” the
same as the filing dates for petitions for reassessment of unitary property (July
20). Identical dates will provide a measure of certainty for taxpayers as well as
the Board.
•
This bill increases the time of notice of hearing on petitions for correction of an
allocated assessment from five days to ten working days. The increase in the
time of notice of hearing conforms petitions for correction of allocated
assessments with other petitions.
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•
This bill requires that petitions for correction of an allocated assessment be
determined by December 31, rather than by July 31. The determination of these
petitions by December 31 is consistent with petitions for redetermination of
unitary and nonunitary value, and with current practices of the Board.
•
The July 20 date in this bill generally corresponds with the result under the
current two-part calculation for petitions for reassessment of unitary value.
•
The change in the date for mailing notices of nonunitary value in this bill
corresponds with current Board practices of valuing nonunitary property in late
July, when the Board roll is adopted. The September 20 date generally
corresponds with the result under the current two-part calculation for petitions
for reassessment of nonunitary value.
•
The mailing of allocated assessed values by mid-June set forth in this bill is
consistent with current practices, and provides sufficient notice for taxpayers to
meet the July 20 petition filing deadline. The increase in the time of notice of
hearing conforms petitions for correction of allocated assessments with other
petitions. The determination of such petitions by December 31 is consistent with
petitions for redetermination of unitary and nonunitary value, and with current
practices of the Board.
Appraisal Consultants
Revenue and Taxation Code Section 674
This provision:
• Requires that a contractor maintain the confidentiality of assessee information
and records, as provided in Sections 408, 451, and 481, that is obtained in
performance of the contract.
•
Requires that initial requests for information and records from an assessee be
made by the assessor. A contractor may request additional information or
records, if needed, but only if authorized by the assessor in writing.
•
Prohibits a contractor from providing appraisal data in his or her possession to
the assessor or a contractor of another county who is not a party to the contract.
(Such information may be exchanged from assessor to assessor as provided in
Section 408.)
•
Prohibits a contractor from retaining information contained in, or derived
from, an assessee's confidential information and records after the conclusion,
termination, or nonrenewal of the contract.
•
Requires the contractor to, within 90 days of the conclusion, termination, or
nonrenewal of the contract:
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Purge and return to the assessor any assessee records, whether originals,
copies, or electronically stored, provided by the assessor or otherwise obtained
from the assessee.
Provide a written declaration to the assessor that the contractor has completed
these tasks.
Requires all contracts to incorporate these provisions in the contract using
language that is prescribed by the State Board of Equalization.
Law Prior To Amendment:
Some county assessors hire appraisal consultants for specialized properties such as
oil, gas and mining properties. Currently, however, there is no statute that
specifically requires consultants who obtain confidential information from taxpayers
in the process of performing appraisal work for county assessors to maintain the
confidentially of this information.
The law requires that assessors keep certain information confidential. Revenue and
Taxation Code Section 408 provides that homeowners’ exemption claims and any
information and records in the assessor’s office that are not required by law to be
kept or prepared by the assessor are not open to public inspection. (The assessor is
required to keep only a limited number of records, such as the assessment roll and a
list of property transfers in the county.) Sections 451 and 481 provide that all
information requested by the assessor or furnished in the property statement and
change in ownership information shall be “held secret” by the assessor. Neither
Section 408, Section 451 nor Section 481 have a penalty associated with its violation.
Background:
The Construction Materials Association of California (CMAC) recently requested
that the Board adopt a regulation specifying the minimum requirements of a
contract between an assessor and any outside consultants. One issue raised in the
request for a regulation was the protection of confidential taxpayer information
where contractors are used. As a result of these discussions, the Board agreed to
sponsor legislation to ensure the protection of taxpayer information by specifically
extending the confidentiality provisions of Section 408, 451 and 481 as well as
provide for the return of taxpayer records once the contract has ended. At the time
the Board adopted this proposal, both the CMAC and the California Assessors’
Association requested modifications to the proposal. Staff met with both parties and
reached agreement from both Associations on the specific language contained in this
proposal.
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Comments:
1. Purpose.
To impose on independent appraisal consultants the same
confidentiality requirements currently imposed on assessors to ensure the
confidentiality of taxpayer information.
2. Key Amendments. The August 24 amendments delete the provisions that
would have made violation of these requirements a misdemeanor. The
provisions which would have make it unlawful for a consultant to disclose
assessee confidential information and the prohibition on the retention of records
after a contract has expired was based on language contained in similar laws
with respect to taxpayer confidentiality for the various tax and fee programs
administered by the Board: Sections 7153 and 7056 (Sales & Use Tax), Section
9255 (Fuel Tax), Section 30455 (Cigarette Tax), Section 32455 (Alcoholic
Beverage), Section 43651 (Solid Waste), Section 45982 (Solid Waste), Section
55381(Fee Collections), and Section 60609 (Diesel Fuel).
3. Other than the general confidentiality requirement for “licensed” appraisers
in Business and Professions Code Section 11328, there is currently no statute
expressly prohibiting public disclosure of taxpayer information and records
obtained by independent appraisal consultants under contract with assessors.
The measure extends to taxpayers whose properties are being appraised by
independent appraisal consultants under contract the same protection from
public disclosure under Sections 408, 451, and 481 that pertains to properties
appraised directly by the assessor and his/her employees.
4. This measure specifically requires that at the conclusion of the contract work,
independent appraisal consultants must return to the assessor any assessee
records provided by the assessor during the course of the contract. To this
extent, the proposal prevents consultants’ retention of taxpayers’ records.
5. The measure promotes statewide uniformity in the application of these
confidentiality requirements by mandating the Board of Equalization to
prescribe the confidentiality language to be included in assessor/consultants
contracts. This will eliminate any disparity among counties and assessors.
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Senate Bill 2195 (Soto) Chapter 1086
Disabled Veterans’ Exemption
Tax levy; effective September 30, 2000. Amends and repeals Section 205.5 of the Revenue
and Taxation Code.
This bill makes permanent the current property tax exemption amounts for totally
disabled veterans, which are otherwise scheduled to be reduced on January 1,
2001.
Sponsor: Senator Nell Soto
Law Prior To Amendment:
The disabled veterans' exemption applies to the home of a qualified veteran or their
surviving unmarried spouse. Depending on the nature of the disability and also the
veteran’s income, the law provides for an exemption in the amount of $40,000,
$60,000, $100,000, or $150,000 of the full cash value of the property, as noted in the
table below. In practice, the disabled veterans’ exemption is generally granted in
either $100,000 or $150,000 amounts. This is because, although the law specifies a
different exemption for veterans who are blind or who have lost the use of two or
more limbs, the Veterans’ Administration classifies these injuries as a total disability,
qualifying the veteran for the higher exemption amount.
Current law establishes, until January 1, 2001, the following exemption amounts:
Disability Type
•
•
•
•
Blind20
Lost Two or More
Limbs21
Totally Disabled
Active Duty Death
Basic Exemption
Low Income Exemption19
$40,000
$60,000
$100,000
$150,000
For persons who have qualified for the exemption in 1983, the income limit is $34,000; for persons
who became qualified after 1983, the income limit is reduced to $24,000.
20 The Veterans’ Administration defines these injured veterans as “totally disabled.” Thus, they
instead may qualify for the $100,000 or $150,000 exemption.
21 The Veterans’ Administration defines these injured veterans as “totally disabled.” Thus, they
instead may qualify for the $100,000 or $150,000 exemption.
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Beginning January 1, 2001, the exemption amount for virtually all persons who are
receiving the exemption will be reduced to $40,000, or to $60,000 for persons with
household incomes below either $24,000 or $34,000, as specified.
Disability Type
•
•
•
•
Basic Exemption
Blind
Lost Two or More
Limbs
Totally Disabled
Active Duty Death
$40,000
Low Income Exemption
$60,000
In General:
There are two property tax exemptions available for persons who have served in the
military: 1) the veterans' exemption and 2) the disabled veterans' exemption.
Veterans’ Exemption
The veterans' exemption applies to any property subject to property tax (for
instance, real property; property used in a trade, profession or business; boats; or
planes) owned by an eligible veteran. The exemption is also available to the
unmarried surviving spouse of the veteran and the parents of a deceased veteran.
The exemption is in the amount of $4,000 of full cash value, providing up to $40 of
tax savings. However, the exemption is nearly extinct. At its peak, from 1956
through 1962, over one million persons received the veterans’ exemption. Today,
fewer than 125 veterans receive the exemption.
The decline of the veterans’ exemption is due to two factors. First, the increase of
the homeowners’ exemption in 1974 to an amount greater than the veterans’
exemption.22 The homeowners’ exemption, in the amount of $7,000 of full cash
value, provides greater tax savings of up to $70. Consequently, veterans who own
homes switched to the homeowners’ exemption available to any Californian.
Secondly, the inability of the remaining non-home owning veterans to qualify for the
veterans’ exemption due to strict wealth limitations fixed in the constitution. Those
limitations are a personal wealth cap of $5,000 for an unmarried veteran and $10,000
for a married veteran, as specified. (See Revenue and Taxation Code §205, and
Section 3, of Article XIII of the Constitution.)
The homeowners’ exemption was first adopted via constitutional amendment (Proposition 1A;
1968 Cal. Res. 9, extra session in 1968, SCA 1). The exemption increased from $3,000 to its current
level of $7,000 via a second constitutional amendment in 1974 (Proposition 6, 1974 Cal. Res. 77 SCA
26).
22
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Disabled Veterans’ Exemption
Section 4(a) of Article XIII of the California Constitution grants the Legislature the
authority to exempt from property tax, in whole or in part, the home of a person (or
a person’s spouse) who is injured in military service. This exemption is commonly
referred to as the “disabled veterans’ exemption.” Injuries that qualify a veteran for
the exemption include: 1) total disability, 2) blindness or 3) lost use of two or more
limbs. The spouse of a disabled veteran is able to maintain the exemption after the
veteran’s death as long as the spouse is unmarried. Additionally, since 1994, the
unmarried spouse of a person who, as a result of a service-connected injury or
disease, dies while on active duty is able to qualify for the disabled veterans’
exemption.
Section 205.5 of the Revenue and Taxation Code implements the Legislature’s
authority to provide a property tax exemption for disabled veterans and/or their
unmarried surviving spouses. As noted in the table above, the amount of the
exemption depends upon 1) type of injury and 2) household income. Exemption
amounts are higher for claimants who have a household income below the amounts
specified in Section 20585, which sets forth the maximum income levels for
eligibility in the Senior Citizens and Disabled Citizens Property Tax Postponement
program administered by the State Controller’s Office. For persons who have
qualified for the program in or before 1983, Section 20585 sets an income limit of
$34,000; for persons who became qualified after 1983 the income limit is reduced to
$24,000.
Disability Definitions
•
Being blind in both eyes means having a visual acuity of 5/200 or less.
•
Losing the use of a limb means that the limb has been amputated or its use has
been lost by reason of ankylosis, progressive muscular dystrophies, or paralysis.
•
Being totally disabled means that the United States Department of Veterans
Affairs or the military service from which the veteran was discharged has rated
the disability at 100 percent or has rated the disability compensation at 100
percent by reason of the veteran being unable to secure or follow a substantially
gainful occupation.
•
Whether a death that occurs while the person is on active duty is a result of a
service-connected injury or disease, is a determination made by the United States
Department of Veterans Affairs.
Background:
Two previous bills have postponed the trigger of the sunset date that reduces the
amount of the exemption. SB 320 (Chap. 1077, Stats. 1989) extended the sunset date
to January 1, 1991 and AB 3 (Chap. 536, Stats. 1995) extended the sunset date to
January 1, 2001.
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In 1998, the homes of 15,563 persons received the disabled veterans’ exemption. The
10 counties with the most homes receiving the exemption include: San Diego (2,813),
Los Angeles (1,359), Sacramento (1,136), Riverside (888), Orange (848), Solano (769),
San Bernardino (734), Monterey (669), Contra Costa (501), and Alameda (466).
Comment:
1. Purpose. To retain the current level of exemption provided to disabled veterans’
on their home. The author’s press release on this bill states: “Disabled veterans
will no longer have to worry about whether or not this exemption will continue.
These veterans fought and sacrificed for our freedom, the least we can do is help
them with their property taxes.”
2. Key Amendments. The April 25 amendment double joins this bill with SB 1362
(Poochigian) to prevent the provisions of SB 1362, which also amend Section
205.5, from being chaptered out in the event the Legislature approves both bills.
SB 1362 increases the low income threshold to $40,000 and provides for annual
increases of the threshold, beginning in 2002, by an inflation factor, as measured
by the California Consumer Price Index for all items. (See SB 1362 analysis for
detail on these provisions.)
3. Without this Bill the Property Taxes of Disabled Veterans and their Spouses
Would have Increased Next Year. For those currently receiving the $150,000
exemption, taxes would have increased up to a maximum of $900 per year. For
those currently receiving the $100,000 exemption, taxes would have increased up
to a maximum of $600 per year.
4.
Current Law Specifies a Lower Exemption Amount For Persons who are Blind
or who have Lost Limbs, which is Misleading. In practice, despite the apparent
distinction in existing property tax law between these veterans and totally
disabled veterans, a veteran that is blind in both eyes or has lost the use of two
or more limbs is rated totally disabled by the U.S. Department of Veterans
Affairs. Thus, virtually all claimants qualify for the higher exemption level of
$100,000, or $150,000 for those below the income threshold. The version of
Section 205.5 which this bill repeals provides the same exemption amount
regardless of the type of disability, consistent with actual practice. (While the
Constitution specifically references these three disability types, it doesn’t specify
that the amount of the exemption must be varied.) Senate Bill 1362 deletes the
misleading language which specifies different exemption amounts depending on
the type of disability.
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TABLE OF SECTIONS AFFECTED
SECTIONS
BILL
NUMBER
CHAPTER
NUMBER
SUBJECT
Revenue & Taxation Code
§ 51
Amend
SB 2170
Ch. 647
Removed Property
§ 53
Amend
AB 1790
Ch. 272
Grapevines – Pierce’s Disease and Phylloxera
§ 69.5
Amend
SB 1417
SB 383
Ch. 417
Ch. 693
Base Year Value Transfer –
Rescissions; Intercounty Ordinances;
Erroneously Granted
§ 75.11
Amend
AB 2891
SB 2170
Ch. 646
Ch. 647
Supplemental Assessments – Statute of
Limitations
§ 75.21
Amend
AB 2891
SB 2170
Ch. 646
Ch. 647
Supplemental Assessments – Exemptions
§ 75.31
Amend
SB 2170
Ch. 647
Supplemental Assessments - Notice
§ 75.5
Amend
AB 1966
Ch. 406
Supplemental Assessments – Possessory
Interests
§ 205.5
Amend
SB 1362
SB 2195
Ch. 1085
Ch. 1086
Welfare Exemption –
Low-Income Rental Housing
§ 214
Amend
AB 659
Ch. 601
Welfare Exemption –
Low-Income Housing
§ 225
Add
SB 2084
Ch. 861
Commercial Trailers and Semitrailers
§ 227
Amend
SB 2170
Ch. 647
Documented Vessels
§ 230
Add
AB 659
Ch. 601
Historical Wooden Vessels
§ 237
Amend
SB 1231
Ch. 601
Indian Housing Authority –
Low-Income Housing Projects
§ 276
Amend &
Repeal
AB 2562
SB 1362
Ch. 922
Ch. 1085
Disabled Veterans’ Exemption
§ 276.1
Add
SB 1362
Ch. 1085
Disabled Veterans’ Exemption
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TABLE OF SECTIONS AFFECTED CONTINUED
SECTIONS
BILL
NUMBER
CHAPTER
NUMBER
SUBJECT
Revenue & Taxation Code
§ 276.2
Add
AB 2562
SB 1362
Ch. 922
Ch. 1085
Disabled Veterans’ Exemption
§ 276.3
Add
AB 2562
SB 1362
Ch. 922
Ch. 1085
Disabled Veterans’ Exemption
§ 401.10
Amend
AB 2612
Ch. 607
Intercounty Pipeline Rights of Way
§ 408
Amend
SB 2170
Ch. 647
State Lands Commission
§ 469
Amend
SB 1844
Ch. 613
Mandatory Audit Threshold
§ 532
Amend
AB 2891
SB 2170
Ch. 646
Ch. 647
Escape Assessments – Statute of Limitations
§ 534
Amend
SB 2170
Ch. 647
Escape Assessments - Notice
§ 674
Amend
SB 2170
Ch. 647
Private Contractors
§ 731
Amend
AB 2891
SB 2170
Ch. 646
Ch. 647
State Assessee Appeals – Filing Deadlines
§ 732
Amend
AB 2891
SB 2170
Ch. 646
Ch. 647
State Assessee Appeals – Filing Deadlines
§ 733
Amend
AB 2891
SB 2170
Ch. 646
Ch. 647
State Assessee Appeals – Filing Deadlines
§ 746
Amend
AB 2891
SB 2170
Ch. 646
Ch. 647
State Assessee Appeals – Filing Deadlines
§ 748
Amend
AB 2891
SB 2170
Ch. 646
Ch. 647
State Assessee Appeals – Filing Deadlines
§ 749
Add
AB 2891
SB 2170
Ch. 646
Ch. 647
State Assessee Appeals – Filing Deadlines
§ 758
Amend
AB 2891
SB 2170
Ch. 646
Ch. 647
State Assessee Appeals – Filing Deadlines
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TABLE OF SECTIONS AFFECTED CONTINUED
BILL
SECTIONS
§ 759
Amend
NUMBER
CHAPTER
NUMBER
AB 2891
SB 2170
Ch. 646
Ch. 647
State Assessee Appeals – Filing Deadlines
Ch. 647
Escape Assessment Notices – Appeal Filing
Period
SUBJECT
Revenue & Taxation Code
§ 1605
Amend SB 2170
Private Railroad Car Tax
§ 11253
Amend AB 2898
Ch.1052
Installment Payment Agreements
§ 11253.5
Add
AB 2898
Ch. 1052
Installment Payment Agreement Statements
§ 11453
Add
AB 2898
Ch. 1052
Employer Withheld Taxes
§ 11553.5
Add
AB 2898
Ch. 1052
Refund Claims - Disability
§ 11597
Amend
AB 2898
Ch. 1052
Late Payment Penalty Relief
§ 11656
Add
AB 2898
Ch. 1052
Tax Preparers Confidentiality
§ 11657
Add
AB 2898
Ch. 1052
Reasonable Fees and Expenses Reimbursement
California Commission on Tax Policy in the New Economy
§ 38061-36067
Add & Repeal
SB 1933
Ch. 619
Commission on Tax Policy
Timber Yield Tax
§ 38452
Amend
AB 2898
Ch. 1052
Late Payment Penalty Relief
§ 38503.5
Add
AB 2898
Ch. 1052
Employer Withheld Taxes
§ 38504
Amend
AB 2898
Ch. 1052
Installment Payment Agreements
§ 38504.5
Add
AB 2898
Ch. 1052
Installment Payment Agreement Statements
§ 38602.5
Add
AB 2898
Ch. 1052
Refund Claims - Disability
§ 38707
Add
AB 2898
Ch. 1052
Tax Preparers Confidentiality
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§ 38708
Add
AB 2898
Ch. 1052
Reasonable Fees and Expenses Reimbursement
Ch. 575
Veterans’ Exemption
Military & Veterans Code
§ 890.3
Add
P R O P E R T Y
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